The Frenchman, who was on Carlo Ancelotti's coaching staff for UEFA Champions League winners Real last season, is set to undertake his first management role in the 2014-15 campaign.
Zidane, 42, will be assisted by youth coach Santiago Sanchez, a statement from the Santiago Bernabeu club confirmed on Wednesday.
Castilla are Real's reserve side and were relegated last season to Segunda Division B, the third tier of Spanish football.
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