Palacios has been the Castilla's top scorer this season with 14 goals and has made six appearances for the first team under head coach Álvaro Arbeloa, totalling 76 minutes, after stepping up when the squad was hit by an injury crisis. He impressed sufficiently to suggest he is ready for consistent senior football, and Real Madrid share that assessment.
Diario AS reports that both clubs have made formal enquiries and that neither would be an unwelcome destination from the club's perspective. Como's track record with Castilla players gives them a natural advantage in the market — Nico Paz has been recalled by Real Madrid after an exceptional season with Cesc Fàbregas' side, and Jacobo Ramón also developed there.
The Italian club is also in contention for a European place next season, sitting within three points of a Champions League spot.
Osasuna's appeal is partly personal. Palacios was born and registered in Navarra through a curious footballing accident — his father, César Palacios senior, was playing for Numancia at the time of his birth and the family registered the newborn there despite the Soria connection — which means the younger Palacios qualifies under Athletic Club's strict Basque-region eligibility rules, though Athletic have now withdrawn from the race after deciding Real Madrid's preferred deal structure, selling 50 per cent of his rights with a buyback clause included, does not align with their transfer model.
Osasuna's interest is genuine and longstanding, reinforced by the model established with Víctor Muñoz last summer, who has flourished at the club and whose value has risen sharply as a result.
Real Madrid will not sell Palacios outright. Their preferred structure involves retaining a buyback option, similar to the Nico Paz arrangement. A full sale would push the price significantly higher — comparable players in the same bracket have commanded fees of €40-60 million.