MADRID (REUTERS) - Real Madrid have agreed to buy Malaga's highly-rated Spain Under-21 playmaker Isco on a five-year contract, their first signing since the arrival of new coach Carlo Ancelotti.

The 21-year-old midfielder, who was also a target for English Premier League club Manchester City, will have a medical check and be presented at the Bernabeu stadium next Wednesday, Real said on their website (www.realmadrid.com) on Thursday.

Malaga-born Isco helped the south-coast club to the Champions League quarter-finals last season and caught the eye with a series of scintillating performances at this month's Under-21 European Championship in Israel.

He scored a penalty in Spain's 4-2 victory over Italy in the final and was voted player of the tournament.

Italian Ancelotti took the reins at Real on Wednesday, replacing Portuguese Jose Mourinho, who returned to former club Chelsea after failing to win major silverware last season.

Isco, who typically plays as a roving attacking midfielder and is on the fringes of the senior Spain squad, will compete for a place in the Real side with the likes of Mesut Ozil, Kaka and Luka Modric.