Sanchez, 21, joined Spurs from Ajax in a club-record £42m ($58m) deal last summer and has gone on to establish himself as a key player at the club, keeping out Toby Alderweireld from the starting XI despite the Belgian's recent return to fitness from a hamstring injury.
Real were linked with a move for Sanchez before he joined Spurs, but the Colombia international said his head had not been turned by the Spanish giants as it is important for him to play regular football.
The 21-year-old has started 20 league games for Mauricio Pochettino's side this season.
"I do not think about money or where it is," Sanchez was quoted as saying by the Daily Mirror. "Right now, here in Tottenham I am very good. I am playing every three to four days. I am being important in the team.
"As big as Madrid is, no matter how big a team are, that has won what they have won, if the conditions are not favourable for me, unfortunately I cannot accept."
Pochettino's preference for Sanchez over Alderweireld has raised question marks over the latter's future in north London, with the likes of Chelsea, Manchester United and Real Madrid all reported to be monitoring his situation.
The 28-year-old returned to action earlier this month after a three-month spell on the sidelines due to a hamstring injury, but was left out of the Spurs squad that played out a 2-2 draw with Juventus in Turin last week.
Pochettino explained after the game that he did not want to jeopardise the centre-back's career by playing him too much and risking a recurrence of his muscle injury.
Aldeweireld's contract expires in the summer of 2019, but Spurs have the option of extending it by an additional 12 months.