Airline's rival link to Spain.
The service starts on October 30 and will operate on Tuesdays, Thursdays and Fridays.
Ryanair will go head to head with easyJet, which also flies to Madrid.
Ryanair's expansion at the Spanish capital follows the announcment of flights to Valencia.
It means the airline now flies to 43 destinations from Liverpool.
Deputy UK marketing manager Elaine Duff said: "We expect to carry an additional 40,000 passengers through Liverpool airport per annum.