Figo was one of the stars of the recent Euro 2000 championships, in which he helped Portugal reach the semi-finals.

Real Madrid confirmed the record-breaking transfer at a news conference after the Portuguese star passed a medical.

He flew into Madrid on a private jet and was presented to the media in the trophy room of the Bernabeu Stadium.

The deal appears to have been struck during the Real Madrid presidential election campaign when Figo's agent Jose Veiga signed a contract with the successful candidate Florentino Perez.

"I'm happy to be here," said Figo, on his presentation.

"One thing I can promise is hard work. I want to win as much as possible with Real Madrid.

"It was a difficult and important decision, but on top of everything, at this moment, I had to think only of myself and for that reason I made this decision.

"Now I'm here with Real. I feel tranquil in front of the fans. I hope to be as happy here as I was during my years at Barcelona."

Transfer record

"It is an honour to be here presenting such a great player as Luis Figo," said Perez at the press conference to announce the signing.

"He is, in my opinion, the best player in the world. As Real are the best club in the world it's normal for the best player in the world to play for the best club in the world."

The £37m Figo now overtakes the previous transfer record set by Argentine striker Hernan Crespo when he moved from Parma to Lazio earlier in July for £35.5m.

Figo's six-year contract with his new club is expected to mean that the player will earn a salary in the region of £3.7m a year.