With no option to buy included in the loan agreement, the Croatian will likely stay in London for just one season. Kovacic is hoping to establish his credentials as a starting-quality midfielder for Madrid, which means he’ll have to impress during his time with the Blues.
If all goes well, the 24-year-old could prove to be one of the better loan signings in Premier League history.
Here’s a look at five of the best.
Carlos Tevez, West Ham to Manchester United (2007 to 2009)
After saving West Ham from relegation by scoring in the final game of the 2006/07 season against Manchester United at Old Trafford, Tevez joined his opponents on the day that summer in what was actually a two-year loan signing.
That two-season spell saw United win the Premier League twice, and reach the Champions League final both seasons, winning in 2008.
The Argentine scored 34 goals across all competitions, forming a lethal partnership with Wayne Rooney.
United decided against buying him outright at the end of his loan spell, and he made a controversial crosstown move to Manchester City, where he would win the league for a third time in 2012.
George Weah, AC Milan to Chelsea (2000)
Weah was past his prime by the time he joined Chelsea, at the age of 33, but he still made an instant impact in England after arriving in the second half of the 1999/2000 season.
Just by virtue of his reputation, his signing created a buzz, and though he only scored five goals for the Blues, they were all vital contributions.
He scored a goal apiece in FA Cup ties against Leicester City and Gillingham, firing Chelsea to the final, where they would go on to lift the trophy.
Weah then moved to Manchester City, where he was unable to scale the same heights of his earlier career, but he’ll be remembered fondly at Stamford Bridge.
Henrik Larsson, Helsingborgs to Manchester United (2007)
On the face of it, just three goals – one each in the league, FA Cup, and Champions League – seems like a middling spell, at best.
But signing Larsson after he left Barcelona was somewhat of a coup for Manchester United. The Red Devils’ players benefitted from the veteran’s presence, and he was such a natural fit in attack that Sir Alex Ferguson tried to extend his loan when it ended in March.
To this day, the United manager believes the rest of that campaign – which saw a league title, but a disappointing Champions League exit in the semi-finals against AC Milan – would have gone differently had Larsson been convinced to stay, and the Swedish legend has since admitted regretting his decision not to.
Jurgen Klinsmann, Sampdoria to Tottenham (1998)
Klinsmann was already a cult hero at White Hart Lane thanks to his first spell at Tottenham, when he scored 30 goals across competitions in 1994/95.
But what cemented his status as a Spurs icon was his second spell, when he arrived for the second half of the 1997/98 season. Tottenham were in danger of getting relegated when the German striker returned, but Klinsmann made sure there was no chance of that.
Nine goals in 15 outings fired the north Londoners to safety, and made him a darling of the White Hart Lane terraces forever.
Romelu Lukaku, Chelsea to West Brom (2012-13)
Romelu Lukaku had struggled to establish himself after joining Chelsea in 2011, but the next season, the club decided to give him playing time by sending him to West Brom.
The Belgian was an instant hit, scoring 17 times in 35 Premier League games for the Baggies. He was technically Chelsea’s highest league scorer that season, because none of the players who actually turned out for the club managed to top that.
His goals led West Brom to an eighth-place finish, their highest ever in the Premier League, and included a famous hat-trick against current employers Manchester United – in Alex Ferguson’s final game, no less.
Roy Hodgson is “confident” Wilfried Zaha will follow his lead in signing a new contract to remain at Crystal Palace.
The manager, who turned 71 on Thursday, has agreed new terms to commit to the club until 2020.
He revealed similar discussions are ongoing with his finest player at the conclusion of a transfer window in which his future became uncertain.
“There’s never been any question of the club wanting or being interested in any offers for Wilf Zaha,” Hodgson said.
“We said at a very early stage, myself, the chairman and the American owners, that we don’t want to bring that many players in, and certainly don’t want to lose the good players we have.
“I’m delighted (Zaha is staying). He’ll be happy too, because he’s such an iconic figure at this club. When you’ve got a player of that quality – and we’ve got several of them – there’s always going to be speculation because other clubs are going to want them.
“I’m not aware of bids (for him), but that doesn’t mean to say they weren’t there. The bids don’t come these days directly to managers. They come through chairmen, and also through sporting directors. Often it goes owner to owner when you’re talking about the big transfers.
“That discussion (about a new contract for Zaha) has been going on, but as far as I’m concerned that’s private between Wilf and the club. I’m just confident they’ll find the solution everyone’s happy with.”
The club are clearly happy with the work Hodgson has done, which is reflected by the contract extension.
The former England boss took over at Selhurst Park in September last year, after Frank de Boer had suffered five defeats in five Premier League games to leave the Eagles rooted to the bottom of the early standings.
Hodgson lifted Palace well clear of relegation with the club ultimately finishing 11th.
It was a fantastic achievement from Hodgson, who had quit as England manager after the Three Lions’ Euro 2016 exit to Iceland.
Hodgson said: “I am delighted to have extended my contract with Crystal Palace. It is a club that has been close to my heart since I was a youngster growing up in the borough of Croydon, and having stood on the terraces in the 1950s, it is a wonderful thing to be managing my boyhood club all these years later.
“We can be proud of our achievements last season in turning things around despite a poor start, but this year we want to ensure we don’t endure the same struggles.
“I am thrilled that I have the support of the owners, who believe that I am the right man to help this club move forward and I will do everything I can to make that happen.”
Palace’s opening fixture of the Premier League season will take Hodgson back to Fulham, where he enjoyed great success between 2007 and 2010.
Of those considered important to Palace’s hopes, only Scott Dann, owing to a long-term knee injury, has been ruled out of Saturday’s fixture at Craven Cottage.
New signings Vicente Guaita, Jordan Ayew and Cheikhou Kouyate are in contention to make their debuts from kick-off, with Max Meyer set to miss out due to a lack of match-fitness.
Slavisa Jokanovic has tempered expectation at Fulham, insisting his side’s primary goal is to survive in the Premier League.
The Cottagers, who returned to the top flight by beating Aston Villa in last season’s Championship play-off final, have spent £100million over the summer and brought 12 players to the club.
However, the Serbian sounded a cautious tone ahead of Saturday’s Premier League opener against Crystal Palace.
“We arrived last in the Premier League, our principle objective and target must be to stay up,” he said.
“We still haven’t started the competition and I prefer walking step-by-step. We will have more information after the first game, it is better to think this way and we will see our level at the end of the season.
“Our first target must be to stay up. We are starting to build a team to try and be competitive at this level.
“We came third in the Championship, we arrived here last and at it’s important and necessary to show ambition and desire to be competitive and spend money to bring players who can help us.”
Jokanovic brought in a dozen players over the summer – five during Thursday’s deadline – as Jean Michael Seri, Maxime le Marchand, Fabri, Andre Schurrle, Aleksandar Mitrovic, Alfie Mawson, Calum Chambers, Sergio Rico, Joe Bryan, Luciano Vietto, Timothy Fosu-Mensah and Andre-Frank Zambo Anguissa bolstered the Cottagers’ ranks.
The boss was happy to splash the cash and would have carried on going if he could.
“It’s important to have investment, I always want more, more and more,” he said.
“For my position it’s normal to need players. We have made great investment and I expect it to benefit the club.
“It is normal, we arrived last in the Premier League and we need to adapt the team and make investments.
“We have made great investment and I expect this will help us to be more competitive in this division.”
One potential problem of bringing so many players in is that Jokanovic must manage them all and keep them happy, not that he is worried about that.
“I am not Santa Claus, I don’t need to make anyone happy,” he said.
“I try to make hard and great competition between the players, this is the most competitive (league) in the world and they need to fight for their position in the training ground.
“My job is to pick a starting XI, this is my job.”
He does have decisions to make in defence as Denis Odoi is suspended, Tim Ream is injured, as is new signing Mawson.