Alvaro leaves for Elche in a permanent €2m transfer.
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The centre-forward has signed a deal with Elche to 2029 and is a Uruguay international.
The 21 year-old made his senior debut for Real in the 2022/23 season, making a big splash under former coach Carlo Ancelotti.
Elche announced last night: "A left-footed striker with impressive physical strength and good aerial play, Álvaro Rodríguez also stands out for his pressing, his ability to link up with his teammates, and his eye for goal.
"His arrival strengthens Elche CF's attacking lineup and further confirms the club's commitment to a young and promising sporting project."