Gremio, who won the Copa Libertadores title last month, booked their spot in the final of the competition courtesy of a 1-0 victory over Pachuca.
Champions League holders Madrid, meanwhile, beat Al Jazira Club 2-1 on Wednesday to advance to the final.
The Spanish giants are the overwhelming favourites to land their third Club World Cup, but Luan has insisted that his team have "the quality to take on Madrid".
"Every side in the tournament has got quality. We had a tough game against Pachuca, and Madrid had a tough game too. The matches have been close," Luan told reporters.
"What we have to do is show why we became South American champions. We've got the quality to take on Madrid."
The Zayed Sports City Stadium in Abu Dhabi will host Saturday's Club World Cup final.