The Spanish club received the last permission the club need to start work on Wednesday.
The club plan to spend £500million in redevelop Santiago Bernabéu Stadium.
The process of redeveloping Santiago Bernabéu Stadium is expected to be completed in October 2022.
While the capacity of the new-look stadium will reduce by 80,000 but it will feature a retractable roof.
In 2016, Real Madrid president Florentino Perez said: “With this agreement, we will start a process of modernization and transformation that will convert the stadium into an avant-garde architectural icon.
“This stadium will act as an economic and touristic invigorator and will contribute to strengthening the image of our city.”