The 22-year-old Turkey international has agreed a six-year deal with the Spanish giants after helping Dortmund land this season's Bundesliga title.
Sahin becomes Jose Mourinho's first signing for the 2011/12 campaign as Madrid contemplate missing out on the La Liga crown to Barcelona once again.
Sahin, who came through the ranks at Dortmund and became the youngest ever player to play in the Bundesliga aged just 16, admitted it had been a difficult decision to make.
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