The Belgian is beginning to demonstrate his qualities with Los Blancos after a tough period following his move from Chelsea.
"He will be the answer but not in replacing Ronaldo that is for sure," Wenger told beIN Sports about Hazard.
"He will not score 50 goals a year because that's now how they play football.
"They need another goal scorer in Real Madrid because Benzema is now 32 and if they had someone younger around him to score the goals, maybe they could do very well.
"Eden Hazard is an exceptional player to create chances to sometimes finish when he needs to do in big games.
"He's not scared of anybody - I don't think Real have yet to see the real Hazard, he's not as sharp physically as he can be.
"That's why I believe they will discover the real Hazard."