Current proposals are to race in the Spanish capital from 2026 until 2035 on a course laid out around the IFEMA convention centre in the northeast of the city, close to its Madrid-Barajas international airport.
The five-kilometre parkland circuit would use the IFEMA pavilion complex and fairgrounds, which is often used for exhibitions and conferences, as its start-finish straight and the site of the paddock complex.
It would also use some existing streets, including the M-11 motorway, to loop alongside football club Real Madrid's Valdebebas training complex and through the former grounds of the Mad Cool music festival.
The plans have received support from the city and community councils of Madrid, although the race has sought external investors so it can be fully funded with private money.
Autosport understands Fernando Alonso's former manager Luis Garcia Abad is one of the key figures behind the deal.
Spain's current grand prix in Barcelona holds a valid contract until 2026, so if Madrid's plans go ahead F1 would host two races in the country that season, in which case the new race could be provisionally labelled the Madrid Grand Prix.
Source: Autosport