The Daily Star says Pellegrini rang Isco and begged him to snub Real.
He told the attacking midfielder he would be an integral part of the team, someone he wanted to build his side around.
A source said: "He called Isco himself in a bid to talk him round and made it clear how important he would be to the team. It remains to be seen if it made a difference though."
Reports in Spain suggest Isco will join Real this week on a five-year deal worth £160,000 a week.