Coentrao has made just 32 league starts since joining Real Madrid from Benfica in 2011, and has played just 284 league minutes this term.
The Portuguese international was heavily linked with a move to Tottenham over the summer, while Manchester United came within inches of securing his services on deadline day before time ran out.
Both Spurs and Manchester United had been linked with making another move for Coentrao in the winter window, but according to reports, the the 25-year-old will pen a new deal that will keep him at the Bernabeu until 2018.
Tottenham appear short in the left-back department and are expected to bring in cover in the January window - however boss Andre Villas-Boas insisted today that isn't the case.
Manchester United boss David Moyes made a move for Coentrao after failing to land Leighton Baines from former club Everton, and is expected to make another swoop for the England international in the new year.