Madrid is home to Real Madrid, who play in the Estadio Santiago Bernabéu. Their supporters are referred to as vikingos, vikings, or, more commonly, merengues, meringues. Their hometown rivals, Atlético Madrid, are also well supported in the city, and their supporters are called los sufridores, the sufferers. The players are referred to as colchoneros, mattresses, in reference to the teams red & white jerseys having been determined by mattress material being the cheapest at the time of the club's formation. Madrid's contribution to the sport is further noticed by the fact that it hosted the 1982 FIFA World Cup final. Along with Barcelona, Glasgow and Lisbon Madrid is one of four cities in Europe to contain two UEFA 5-star stadia: Real Madrid's Santiago Bernabéu and Atlético Madrid's Vicente Calderón both meet the criteria.

Some of Spain's best and more well-known footballers are Madrileños, including Real Madrid legend Emilio Butragueño and co (La Quinta del Buitre, "The Vulture's Cohort"), Liverpool's Pepe Reina and Fernando Torres and Real Madrid veterans Raúl González and Iker Casillas.

The city is also host to two basketball teams in the Asociación de Clubs de Baloncesto (ACB league), and the Circuito Permanente Del Jarama, a motorsport race circuit which formerly hosted the Formula One Spanish Grand Prix. Historically, the city serves as the last stage of the Vuelta a España cyclist classic in the same way as Paris does in the Tour de France.

Skiing is possible in the nearby mountains of the Sierra de Guadarrama, where the ski resorts of Valdesqui and Navacerrada are located.

The city bid for hosting the 1972 and 2012 Summer Olympics, which were lost to Munich and London respectively. Nevertheless, Madrid is currently bidding to host the 2016 Summer Olympics.