With the tie finely balanced at 1-1 following the first leg in Spain, United struck first through an own goal by Sergio Ramos early in the second half but the game turned on its head after Nani was sent-off in the 56th minute for a high boot in a challenge with Alvaro Arbeloa.
The result completes a wonderful week for the Spanish giants following two wins over bitter rivals Barcelona and the visiting fans saluted coach Jose Mourinho as they target an historic 10th European crown.
Ronaldo had a relatively quiet game on his first return to Old Trafford since his £80m transfer in 2009 but the script was always written for the Portuguese forward to have the final say.
He may not have done so were it not for referee Cuneyt Cakir, who infuriated United with his decision to show a red card to Nani. The United winger appeared to be challenging for the ball and certainly meant no harm to Arbeloa, but the consequence of his dismissal was that the home side's gameplan, which had worked so well to that point, was ruined.
Sir Alex Ferguson made a hugely bold decision of only naming Wayne Rooney as a substitute for United, with Ryan Giggs making his 1000th career appearance in central midfield in the absence of Phil Jones with an ankle injury. Nemanja Vidic returned at centre-back in place of Jonny Evans after the United captain missed the first leg.
There were no such surprises in the Real Madrid line-up, with Gonzalo Higuain selected ahead of Karim Benzema to lead the attack as Jose Mourinho returned to his first choice starting XI having rested a number of players in the 2-1 win over Barcelona on Saturday.
Mourinho claimed this clash between two of the biggest clubs in the Europe would "stop the world" and stars past and present were in attendance at Old Trafford for this showpiece occasion, from Diego Maradona to Gareth Bale.
Ferguson called on the crowd to "turn up the volume" in his pre-match programme notes and Old Trafford was a cauldron of noise at the teams made their way out of the tunnel at the Stretford End, with the home fans unveiling a mosaic in support of their team.
As the team line-ups were read out, Ronaldo's name was greeted with an enormous roar from all sides of the stadium, the former United man looking choked as he patted his chest and raised an arm to acknowledge the reception.
Ferguson predicted an attacking game but set out to stifle Real and counter-attack, with his plan working almost perfectly in the first half as they restricted the visitors and came closest to opening the scoring.
United captain Vidic thought he had scored in the 21st minute but his thumping header from Giggs’ corner rattled against the post before Danny Welbeck, admittedly in an offside position, mishit the rebound straight at Real goalkeeper Diego Lopez.
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But the hosts had to wait less than three minutes after the break to take the lead.
After Madrid defenders blocked two United shots in the penalty area, the ball landed at Nani's feet on the left. The Portuguese winger played the ball into the box and, after the faintest touch off Welbeck, Ramos could only turn it into his own net.
The turning point, however, came in the 56th minute when Nani was shown a straight red card by Turkish referee Cakir for a high foot in a 50-50 challenge with Arbeloa. On first viewing, it looked a harsh decision and it certainly left Ferguson and the United players fuming with the officials.
Mourinho responded to the man advantage by bringing on Modric for Arbeloa and the former Tottenham midfielder levelled the score in the 66th minute. After picking the ball up 30 yards from goal, Modric breezed past Tom Cleverley and struck a thunderous effort in off the post from 25 yards.
Three minutes later, Real Madrid took the lead for the first time in the tie. Higuain fizzed a low cross along the six-yard box and Ronaldo used all of his predatory instincts to slide in at the far post and end United's European campaign.