The 23-year-old, who has been on international duty with Spain at the Confederations Cup, will be presented to the media when he returns from South Africa next week.
Having already spent £140 million on Kaka and Cristiano Ronaldo, new coach Manuel Pellegrini has moved to bolster a defence that conceded eight goals against Barcelona and five against Liverpool last season.
Albiol, a long-term target for Rafa Benitez's Liverpool, is expected to cost €15million and will fill the void left by Juventus-bound centre-back Fabio Cannavaro.
The defender, who suffered a serious car crash in 2004 which left him without a spleen, is likely to partner Portuguese international Pepe in central defence.
He made his Valencia debut in 2003 and first played for Spain in a 3-1 win over Denmark in 2007.
The announcement may come as a surprise to Albiol following his comments after Spain's shock defeat to USA on Wednesday night.
"The truth is that I did not know anything because we had a game," he said.
"Let's see if I hear something on Thursday."
REAL MADRID FANS! Check FourFourTwo.com’s ever-expandinginterviewssection for more stuff to read:
Q&A Ruud Van Nistelrooy, Raul, Robinho, Fabio Cannavaro, Fabio Capello, Samuel Eto'o
One on One Michael Owen, Ronaldo, Nicolas Anelka, David Beckham
Web Exclusives Guus Hiddink
And Another Thing Best league in the world?
Sing When You’re Winning Rafael Nadal
My Secret Vice Michel Salgado
Perfect XI Gheorghe Hagi
Plus! Rate Real players (and others) on Talentspotter
