Since Real boss Zinedine Zidane returned to the club, the Frenchman has had one eye on how Los Blancos are going to overhaul their squad for next season.
And according to German newspaper Bild, Real have set their sights on Sancho.
It will come as a blow to Ole Gunnar Solskjaer, who has identified the England winger as one of his top targets this summer.
Solskjaer was hoping the 19-year-old would be an effective winger to link up with his fellow countryman, Marcus Rashford.
Sancho has had an impressive season with Dortmund this campaign and currently leads the league in assists with 13.
He has also managed to score 11 goals in his 30 Bundesliga appearances this season.
Unsurprisingly such fantastic form has caught the eye of Zidane, who has reportedly told club president Florentino Perez to bring the player to Spain in the summer.
Dortmund gave Sancho a home in Germany back in 2017 after the forward turned down a lucrative contract offer from Manchester City, whose academy he came through.
The German side sealed the deal for just £8million and have since given the player the minutes he desperately wanted to improve his game.
Although Dortmund have been trying to rebuff approaches for top clubs across Europe, Bild reports he could be sold for the right amount.
The club are reportedly willing to let Sancho go for €180m (£156m).
If the fee isn’t met Dortmund aren’t under any pressure to sell their star player, as Sancho will still have three years left on his contract come this summer.
As a result of the fee involved and the emergence of Real’s interest in Sancho, United could move their interests to Benfica’s Joao Felix.
The 19-year-old reportedly has a €120m (£104m) release clause in his contract.
And according to the Daily Mail, United have sent their lead scout out to get a second opinion on the attacking midfielder.
It’s reported the Red Devils’ regular Portuguese scout Joao Ferreira has been joined by one of United’s main scouts Simon Wells to view the youngster.