Santos and Real Madrid have agreed a £53m fee for Neymar to join the Spanish club next summer, according to ESPNsoccernet.
The 19-year-old Brazilian international is one of the most coveted players in world football at the moment, having produced a number of eye-catching performances for Santos.
He was linked with moves to Madrid, Barcelona and Chelsea during the last transfer window, but he made it clear that he wished to stay put until the conclusion of the 2012 Olympic Games in London.
"Neymar will be a Real Madrid player in July, but he is not going there any earlier," said a source. "He has not signed a contract as yet."
Neymar is expected to join Los Blancos on a deal worth £1m a-month.