The Spanish champions became the first sports team anywhere to break the 500 million euro ($666 million) revenue barrier as it stayed ahead of Spanish rival Barcelona in the Football Money League compiled by accountant firm Deloitte.
Both teams saw their income rise by 7 percent during the 2011-12 season, with Madrid taking in 512.6 million euros ($683 million) and Barcelona 483 million euros ($643 million).
While the top six teams remained unchanged, only third-place Manchester United revenue's dropped, 3 percent to 320.3 million pounds ($507 million) after first-round elimination in last season's Champions League.
''There is minimal economic growth in Europe yet football clubs are growing an average of 10 percent,'' said Dan Jones, lead partner of Deloitte's sports division. ''An unchanged top six emphasizes the fact that these clubs have some of the largest fan bases and hence strongest revenues, in both domestic and international markets.''
Manchester City rose five places to seventh with revenue of 231.1 million pounds ($366 million) in a season that large investment by Abu Dhabi ownership helped achieve its first English league title in 44 years. The growth largely was due to a new sponsorship deal with Etihad Airways, while the club benefited from playing in the Champions League for the first time.
City trails United by five points in the 2012-13 title race and was knocked out of the Champions League in the first round for the second successive season.
The only new entrant was 20th-place Newcastle, which took Valencia's spot and returned to the list after a three-year absence. The Magpies generated 93.3 million pounds ($148 million) after finishing fifth in the league.
The top 20 clubs in the Deloitte list generated a combined 4.8 billion euros ($6.4 billion) in 2011-12, a 10 percent rise from the previous season's top 20.