Denmark playmaker Eriksen has enjoyed another stellar season at Spurs, scoring seven goals and supplying 12 assists in the Premier League, as well as helping the club to reach the Champions League final.
However, he only has another season remaining on his contract and, amid speculation Madrid are planning a summer approach, Sherwood fears Eriksen could leave Spurs.
Sherwood told Bwin : “I would love to see Eriksen sign a new contract and commit his future to Tottenham, but I’m not sure that he will.
“I think we might see Eriksen in a Real Madrid shirt next season.
“Real Madrid are always just a phone call away from signing most players in the world because when that phone rings, it is very difficult to turn down Real Madrid.
“I think Real Madrid will be looking for Eriksen to replace (Luka) Modric in the heart of their midfield.
"Modric was a great player when he was at Tottenham, but he has gone on to achieve unbelievable things that he probably wasn't capable of in the Premier League.
"You surround Eriksen with world-class players in a non-competitive league where his team has the vast majority of the possession and it is scary to think what he could do with a football.
"Quality technicians like Eriksen and Modric will always shine and the cream always comes to the top."
If Spurs do lose Eriksen at the end of the season, Sherwood believes that Jack Grealish would be an ideal replacement after the Aston Villa midfielder missed out on a move to Mauricio Pochettino’s side last summer.“I would like to see Tottenham sign Jack Grealish this summer," added Sherwood.
“I think Grealish is worth the £30-40 million that [Ryan] Sessegnon was rumoured to be worth last year.
“I’ve worked with Jack and I know how good he is and what he is capable of if he were to take a step up and play alongside great players at Tottenham.
"I think Grealish will be an England international the moment he pulls on a Tottenham shirt.
"Grealish is good enough to be in the England squad and playing for his country already, but it doesn't seem to work like that playing in the Championship.
"If Eriksen were to leave this summer, I think Tottenham should consider looking at Grealish as his replacement. Eriksen is obviously ahead of him in his development so far, but Grealish shares that work ethic and desire to improve that I think he will reach Eriksen's level."
Spurs had also been linked with a move for Fulham's teenage winger Ryan Sessegnon last summer, but after he suffered difficult season with the Cottagers, Sherwood thinks Tottenham had a lucky escape, saying: “I think Tottenham should forget about signing Ryan Sessegnon and probably thank their lucky stars they didn’t spend a fortune on him last summer.”