Tottenham have agreed personal terms with the 22-year-old, who will leave Dinamo Zagreb for White Hart Lane this summer subject to his passing a medical.
Modric must also obtain a work permit.
Modric was on Tyneside on Tuesday to discuss a move to St James' Park and visit the club's training ground, but obviously something didn't impress him because he is off to White Hart Lane.
Kevin Keegan made no secret of his admiration for the player.
KK: "If you had a list of the midfield players around Europe who Newcastle could possibly attract, Luka Modric would be one of them.
"I think he would be pretty much on everyone else's list as well because he is a fantastic prospect.
"If you look at the midfield players who have a fantastic future, he would be one of them. But every other club in the league, from Arsenal and Manchester United, would like Modric."