The Argentina international returned to training earlier this week and Diego Simeone confirmed he would be involved in some capacity against Los Blancos.
Alvarez's position with the Los Rojblancos supporters remains tense following his failed attempt to leave the club this summer.
The former Manchester City attacker publicly stated his desire to move on and join Barcelona during the 2026 FIFA World Cup.
However, after a lengthy transfer saga, Atleti held on to their star man and refused to negotiate a transfer with Barca.
Alvarez has been booed several times by Atleti fans when called off the bench so far this season and that could the case if Simeone turns to him today at the Estadio Metropolitano.
Simeone has made three changes to the team which won 4-0 at home to Osasuna in midweek, with Marc Pubill, David Hancko and Guiliano Simeone all starting in place of Robin Le Normand, Ademola Lookman and Koke.
Jose Mourinho makes two alterations for Real Madrid as Jude Bellingham and Denzel Dumfries replace Trent Alexander-Arnold and Yan Diomande.