The 20-year-old makes his first La Liga start of the season as Jose Mourinho's men welcome their city-rivals to Santiago Bernabeu
The Castilla graduate has been awarded his first start in La Liga this season, with Karim Benzema having to settle for a place on the bench.
Luka Modric, Alvaro Arbeloa, and Gonzalo Higuain all miss out due to suspension so Pepe, Kaka, and Michael Essien all make the first XI for the clash at Santiago Bernabeu.
Cristiano Ronaldo and Mesut Ozil will support Morata from the wings in attack.
Rayo have been given a boost in that Leo Baptistao has recovered from a sprained ankle to make the starting line-up. Tito also makes his return from suspension.
However, Paco Jemez begins his two-game touchline ban and will watch from the stands.
Real Madrid (4-2-3-1): Diego Lopez; Ramos, Pepe, Varane, Coentrao; Essien, Khedira; Ozil, Kaka, Ronaldo; Morata
Subs: Benzema, Callejon, Di Maria, Jese, Carvalho, Albiol, Jesus
Rayo (4-2-3-1): Ruben; Tito, Galvez, Figueras, Casado; Javi Fuego, Trashorras; Chori, Piti, Leo, Lass
Subs: Carlos, Delibasic, Adrian, Vazquez, Arbilla, Amat, Cobeno