Jovic, 24, joins Fiorentina on a two-year deal until June 2024. Madrid will retain the right to receive 50% of a transfer fee, should the Serie A club decide to move the player on.
The Serbia international will look to reignite his career in Italy after scoring just three LaLiga goals, and never finding the net in the Champions League, during a disappointing spell at the Bernabeu.
Madrid manager Carlo Ancelotti was keen to trim his squad this summer, sources have told ESPN, with both Jovic and Mariano Diaz viewed as surplus to requirements in attack.
Jovic played for Red Star Belgrade, Benfica and Eintracht Frankfurt, catching the eye of several top clubs after scoring 17 times in the Bundesliga in 2018-19, before Madrid won the race for his signature in June 2019.
A return of two league goals from 17 appearances in 2019-20 saw him loaned back to Frankfurt for the second half of the following season, and his return to Madrid last year brought just one league goal as Benzema enjoyed the best form of his career.
Jovic departs having won two LaLiga titles and a Champions League in his time at Madrid, despite having played a limited role in those victories.
At Fiorentina, he joins a team which finished seventh in Serie A last season, a point behind Roma, to qualify for the Europa Conference League.