Benzema's acquisition from Lyon is the fourth major signing by Real since the return of Florentino Perez as president, after Brazilian midfielder Kaka, Portuguese winger Cristiano Ronaldo and Spanish defender Raul Albiol.
It dashed Manchester United's attempts to sign Benzema, who signed a six-year deal. The move came quickly after Real Madrid's efforts to sign Spanish international David Villa from Valencia failed.
"Playing for Real will open up all sorts of different perspectives and challenges for him and where he will be surrounded by really big stars," said Lyon coach Claude Puel. "That can be a beneficial experience for Karim. It is a challenge for him. He has character, though. He has everything possible to succeed. I think that he possesses the strengths necessary to respond to this huge challenge."
Benzema led the Ligue 1 in scoring in 2007-08 and was tied for second in 2008-09. He finished his Lyon career with 43 goals in 112 league games.
Real Madrid has also been eyeing Benzema's French national team partner Franck Ribery, who plays for Bayern Munich.
The asking price for Ribery reportedly tops $100 million.