It was officially announced on Monday that Kepa has signed a new contract with Bilbao, ending further speculation about his future amid interest from Champions League holders Madrid.
The deal has caused Florentino Perez to rethink his summer targets, according to a variety of sources, instead focusing on capturing the Belgian shotstopper from Chelsea.
'Los Blancos' current No. 1 Keylor Navas hasn't been the same since his thigh injury sustained in October whilst Kiko Casilla isn't trusted between the sticks, leaving Zinedine Zidane searching for a new keeper.
Courtois appears to be the best option available, with previous target David De Gea also prefering to stay at his current club Manchester United, as the 25-year-old has kept 13 clean sheets for the London club so far this season.
That consistency would be extremely helpful as Madrid look to claw back a 19-point deficit to eternal rivals Barcelona in La Liga.
However, they would reportedly face competition for Ligue 1 leaders PSG and the player's current club Chelsea, who want to keep the Belgian international at Stamford Bridge.
Coutois has made 139 appearances for the 'Blues' since joining from Genk in 2011, although three seasons were spent on loan to Atletico Madrid.