Real Madrid have confirmed that Carlo Ancelotti will succeed Jose Mourinho at the Bernabeu.
The former Chelsea and AC Milan manager leaves Paris St Germain to take on the role in the Spanish capital.
PSG in turn have announced that Laurent Blanc has been appointed as Ancelotti's replacement at the Parc des Princes. The former France manager, who left his role with the national team after Euro 2012, has signed a two-year deal.
Ancelotti was installed as the favourite to lead Real Madrid as soon as it was announced that Mourinho would be leaving the club. The Italian boasts a fine record that includes winning the double at Chelsea and two Champions League titles with AC Milan.
A statement on Real's website read: "Carlo Michelangelo Ancelotti will coach Real Madrid next season.
"The Italian has experienced success in every country where he has managed and arrives in the Spanish capital after being named coach of the season in France."
The 54-year-old has signed a three-year contract.
His move to the Bernabeu, which he quickly expressed a desire to fulfill, was delayed while PSG sought a replacement for the man who led them to the Ligue 1 title last year.
The mega-rich team had been linked with Arsenal manager Arsene Wenger, Tottenham's Andre Villas-Boas and former England manager Fabio Capello among others.
Blanc, who played for Manchester United as a defender, is well respected in France and was credited with installing some order in the French national team after their disastrous 2010 World Cup campaign. He also led Bordeaux to a surprise Ligue 1 title in 2009. However, his appointment lacks the 'blockbuster' nature of some of the other managers linked with the role.