Madrid will travel to Turin for the first leg on April 3 against the Italian champion it beat 4-1 in the 2017 final at Cardiff.
Jurgen Klopp will renew hostilities with Pep Guardiola following two brilliant league meetings.
The Quarter-final will also see German Champions Bayern Munich lock horns with the first time appearing Sevilla who are riding high on confidence after beating Premier League giants Manchester United in the Round of 16. That tie is a repeat of last season's final, which Real won 4-1.
"We can play better than we played even in the good moments of that game and that's what we have to try [against Watford]". Manchester City are heading 35 miles down the road to Liverpool for their next Champions League adventure.
"We will play the first match at home and both (Medhi) Benatia and (Miralem) Pjanic will be suspended, they are two important players for us so it will be another hurdle to overcome, but we both start the match at 0-0".
After progressing to the quarter-final courtesy of dumping out Swiss outfit FC Basel, City awaited their fate in the next round with the competition throwing up Liverpool.
What Liverpool will point out is that these errors were forced in the febrile atmosphere of a ground that City plainly hate to visit. Dealing with players like Messi and Suarez gives us great motivation.
Why Gareth Southgate should ditch three at the back for England
According to him, there were several players who gambled "behind closed doors" and lost mind-blowing amounts of money at the time. On a possible boycott, Southgate added: "It's a matter that is completely out of my control".
The sides have already met twice this season, with Liverpool inflicting City's only Premier League loss of the season courtesy of a 4-3 win at Anfield in January, after City had destroyed the Merseysiders 5-0 at the Etihad in September. First surprise was that the lad who made me laugh out loud and forget my justified roadrage mood was actually a Scouser, very unusual when the media interview RS fans in general.
And now, the only two teams left in the Champions League are drawn against each other, which means there will be only one English side in the semi-final.
"We expect from ourselves that we win football games, especially if we lost a game like the last one".
"But he needs more recovery time".
Friday's draw paired the Premier League rivals together, with Liverpool the only side to have beaten City in the league so far this season.
"What do you think I'm talking about?"