Cristiano Ronaldo scored the winning penalty in the shoot-out which gave Real Madrid their 11th European crown as city rivals Atletico suffered yet more Champions League heartbreak.
Fernando's unfortunate deflection from a Gareth Bale was the killer blow that saw a dominant Real Madrid knock Man City out of the Champions League to make the final in Milan.
Manuel Pellegrini recognises the need for an improved attacking performance from his Manchester City side at Real Madrid this week.
Saul Niguez's first-half solo strike proved enough to hand Atletico Madrid a narrow 1-0 victory over Bayern Munich in the first leg of their Champions League semi-final at Vicente Calderon.
The Spain Under-21 international's early wonder goal handed the Spanish side the edge ahead of next week's second leg at the Allianz Arena.
Arturo Vidal came closest to netting an equaliser for Pep Guardiola's side but the home defence worked hard to keep his and his team-mates' efforts out as they recorded their fifth consecutive clean sheet.
Manchester City survived a late onslaught from a Real Madrid side lacking Cristiano Ronaldo to draw the first leg of their Champions League semi-final 0-0..
Arturo Vidal's thunderbolt and Thomas Muller's tap-in comfortably put Bayern Munich through to the Champions League semi-finals for the fifth successive season, this time with a 3-2 aggregate win over Benfica.