The Portuguese defender returns after almost a month out with a rib injury and is named in the starting eleven along with Champions League debutant Lucas Silva.
Silva, a winter signing from Brazilian side Cruzeiro, lines up alongside Toni Kroos and Isco in midfield.
Karim Benzema shook off a bug in time to be included in attack along with Cristiano Ronaldo and Gareth Bale.
With the more experienced Ralf Fährmann and Fabian Giefer out injured, Schalke handed a start to Timon Wellenreuther in goal.
The 19-year-old has played in each of the German's side last two Bundesliga matches and was set to make his Champions League debut.
Former Real Madrid striker Klaas-Jan Huntelaar, Schalke's topscorer in the competition with three goals in six group matches, returns for the home team.
The Dutch international had been serving a four-game suspension in the Bundesliga.
Teams (kick-off 1945 GMT):
Schalke (5-3-2):
Wellenreuther; Aogo, Nastasic, Matip, Hoewedes (capt), Uchida; Boateng, Neustaedter, Hoeger; Choupo-Moting, Huntelaar.
Coach: Roberto di Matteo (ITA)
Real Madrid (4-3-3):
Casillas(capt); Carvajal, Varane, Pepe, Marcelo; Lucas Silva, Kroos, Isco; Bale, Benzema, Ronaldo.
Manager: Carlo Ancelotti (ITA)
Referee: Martin Atkinson (ENG)