Salgado was out of contract at the end of the season
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Raul, Guti and Michel Salgado have agreed new contracts with Real Madrid.
Spanish international defender Salgado had been linked with Chelsea and Manchester United.
But he has agreed a new-five year deal with Real after a last-minute breakthrough in negotiations with the Spanish champions.
Real announced on Sunday that the three players had agreed to extend their contracts with the club and that the deals would be signed in the next few weeks.
Salgado's contract had been due to expire at the end of the season but always maintained remaining at Real had been his preferred option.
"I've always been hopeful that in the end I would stay at Real Madrid," said 28-year-old defender Salgado.
"I feel honoured that Chelsea and Manchester United were interested in signing me, it makes me feel very proud, but I have now got what I wanted.
"It has been a tense week, but from now on I will be much more relaxed as I have signed what will be the last long contract of my career."