Zinedine Zidane's side beat arch-rivals Barcelona into second place after a fine year that saw them claim the La Liga and Champions League titles.
UEFA's ranking system is based on results over the previous five seasons, meaning that despite a disappointing start to the current campaign that has seen them fall 14 points behind Barca in the title race, Real remain the undisputed leader in the rankings.
A large part of that is down to their Champions League success in recent years, with Real having claimed the title of champions of Europe's premier club competition in three of the last four years.
Real finish 2017 with 148.000 ranking points, comfortable ahead of Barca who came in second with 126.000.
Coming in third and fourth were Bayern Munich (125.000) and Atletico Madrid (122.000) respectively.
The rankings show the strength of the Spanish league in recent years, with La Liga contributing three of the top four teams and Sevilla also making it into the top 10.