Modric has had an excellent first half of the season, being one of Los Blancos' top performers in LaLiga Santander and Champions League.
"I'm talking with [Real Madrid] and my [contract] renewal is going in the right direction," Modric said at his press conference ahead of Real Madrid's game against Athletic Club in the Supercopa de Espana.
"I'm happy with how things are going, but I can't say more."
Zinedine Zidane has switched up his midfield after a few consecutive defeats back in November but Modric believes that all players will be given their opportunities.
"I don't see why we're not going to hold out," Modric added.
"The coach has now bet on a group [of players], but all the players are important and when it's time to play, everyone gives everything.
"The coach is going to give everyone opportunities, as he has always done. I don't see any problem and the coach will surely rotate."