Florentino Pérez years

In July 2000 Florentino Pérez was elected club president vowing to erase the club's debt and modernise the club's facilities, however the primary electoral promise that propelled Pérez to victory was the signing of then-FC Barcelona star Luís Figo. During the campaign, Pérez claimed he had an agreement with the Portuguese winger that would see Figo move to the Bernabeu should Pérez be elected. On July 16, Pérez won the election. Eight days later, Luís Figo was presented with the number 10 shirt of Real Madrid. Days later, surrounded by controversy, Real Madrid idol Fernando Redondo, who had openly supported Pérez's opponent Lorenzo Sanz, was sold to Italian giants AC Milan.

During the summer of 2000, Real Madrid signed Claude Makélélé, Albert Celades, Flávio Conceição, César Sánchez, Pedro Munitis, and Santiago Solari although aside from Makélélé and Conceição the rest had been signed previous to the election of Florentino Pérez. Expectations were high as Real Madrid began the 2000-01 season with the possibility of winning 5 trophies but stumbled at the first test losing the European Super Cup by a score of 1-2 to Galatasaray. An injury to Fernando Morientes left Real Madrid without a centre forward, but manager Vicente Del Bosque improvised by using youth team graduate Guti, in that role and Real Madrid made a good start to both domestic and European campaigns. But Real Madrid were defeated 2-0 at the Camp Nou against Barcelona and were later eliminated from the Copa del Rey by Toledo as well as losing the Intercontinental Cup final to a Boca Juniors side led by Martin Palermo and Riquelme. But Real Madrid recovered form and went top of the Spanish first division in mid-January, a position they would not relinquish on their way to winning the title. Real Madrid advanced from the second group stage of the Champions League to face Galatasaray in the quarterfinals. Real Madrid lost the first leg in Istanbul 3-2 but recovered to win the tie after a 3-0 victory in the Bernabeu. This would produce a replay of the 1999-2000 Champions League semifinal against Bayern Munich. Real Madrid would not reach the final however, losing 2-3 on aggregate to the eventual champions. Real Madrid would not be denied the league title however, and on 26 May, the merengues would crown themselves champions of the Spanish first division with an emphatic 5-0 win over Alaves at the Bernabeu. Goals by Raúl (2), Guti, Hierro, and Iván Helguera would ensure victory and Real Madrid's 28th league title with two matches left to play.

After reaching an agreement to re-zone and sell the Ciudad Deportiva, Pérez went on to sign Zinédine Zidane (2001), Ronaldo (2002) and David Beckham (2003). The media began referring to the team as Los Galácticos. Initially the strategy, eventually dubbed Zidanes y Pavones and meant to combine world stars and youth team graduates, was successful and Real Madrid won La Liga in 2001 and 2003 and the UEFA Champions League in 2002, their centenary year. They also won the Intercontinental Cup, the European Super Cup and the Supercopa de España in both 2001 and 2003.

Off the field the Zidanes y Pavones policy resulted in increased financial success based on the exploitation of the club's high marketing potential around the world, especially in Asia[citation needed].

In the summer of 2003, just after capturing another La Liga title, Florentino Pérez and the board of directors refused to renew the contract of coach Vicente Del Bosque and after an internal dispute forced captain Fernando Hierro to leave the club. They also ignored Claude Makélélé's request of a new contract with a better salary, in return, Makélélé asked for a transfer request, and was transferred to Chelsea. In the following years the team's on-field performance started to decline. Portuguese manager Carlos Queiroz replaced Vicente Del Bosque for the 2003-2004 season. Real Madrid started the season brightly and were 8 points clear in the Spanish 1st division in February but a late season slide saw them struggle to finish fourth. Further disappointment came when AS Monaco, thanks impart to goals from on-loan striker Fernando Morientes, eliminated Real Madrid from the UEFA Champions League at the quarterfinal stage. Real Madrid's poor form continued as Real Zaragoza upset them in the Copa del Rey final. Shortly after the season, Carlos Queiroz was sacked and replaced by ex-Real Madrid player, José Antonio Camacho. Pérez, at the request of Camacho, signed two central defenders to try to correct the team's defensive shortcomings. Real Madrid spent a total of €45 millions on Argentine defender Walter Samuel and English centre back Jonathan Woodgate but missed out on signing Arsenal's midfield general, Patrick Vieira due to the Vieira's boldness of asking a 'Galactico' paycheck (like Figo, Zidane, Ronaldo and David Beckham and unlike Claude Makélélé, who left for exactly that reason - €9 million Euro's per year). The summer of 2004 also saw the sale of Cameroon Samuel Eto'o, who had been loaned out to Real Mallorca, to archrivals F.C. Barcelona. English striker Michael Owen was bought from Liverpool FC but never settled at Real Madrid while Eto'o went on to great success with Barcelona. Camacho only lasted two months before resigning after a disappointing start into the season. He was replaced by interim coach Mariano García Remón and in December 2005 Brazilian manager Vanderlei Luxemburgo became the permanent replacement. Although Real Madrid did finish a distant second in the Spanish league, Luxemburgo was unable to lead Real Madrid in to the quarterfinals of the Champions League. The 2005-06 season began with the promise of several new signings (Julio Baptista (€20 Million), Robinho (€30 Million) and Sergio Ramos (€30 Million - Release Clause) but the Brazilian coach was not able to find the right formula on the pitch as Real Madrid's poor form continued, with the team hitting rock bottom after a humiliating 0-3 loss at the hands of F.C. Barcelona in the Santiago Bernabeu. Luxemburgo would eventually resign and his replacement was Juan Ramón López Caro, formally the manager of Real Madrid Castilla. A brief return to form came to an abrupt halt after losing the first leg of the Copa del Rey quarterfinal, 6-1 to Real Zaragoza. Shortly after, Real Madrid were eliminated from the Champions League for a third successive year, this time at the hands of Arsenal. On February 27, 2006, Florentino Pérez resigned. Real Madrid eventually managed to finish second in the league but did not pose a serious threat to defending champions, F.C. Barcelona.