Juan Ramon Lopez Caro is to continue as Real Madrid's caretaker manager until the end of the season.
Lopez Caro's side lie eight points behind Barcelona
Lopez Caro, who had been youth team coach at the club, became caretaker manager on 4 December following the sacking of Wanderley Luxemburgo.
Real have won one, lost one and drawn one match under Lopez Caro.
Meanwhile, Real have appointed former coach Benito Floro as their new director of football, replacing Italian Arrigo Sacchi.
"Floro is the ideal man to take on this responsibility," said Real vice-president Emilio Butragueno.
"He is a student of football, methodical in his approach, familiar with Real Madrid and we have no doubt that this is the right decision for the club."
Floro coached Real to the King's Cup in the early 1990s before sacked.
"My intention is to try to establish a common style of play, a common identity and sentiment right through the club in order to achieve positive results," said Floro.
Real are currently third in the league, eight points behind leaders Barcelona.