The attacking midfielder recently suggested he might have to leave the Bernabeu in order to secure regular first-team football elsewhere, but he has developed into a key figure for Madrid again in recent weeks.
The 24-year-old is delighted with his new role and hopes to reach an agreement over a renewal sooner rather than later, with his existing contract due to expire in 2018.
“I still have one-and-a-half years left on my current contract,” Isco, who has been repeatedly linked with a move to Tottenham, told reporters.
“But the club and I are both keen to renew. I hope we can sort something out.
“I am getting regular playing time now and I am happy to be able to help the team.”
Isco has made nine LaLiga appearances this term – starting their last six games – and has two goals to his name.