Madrid and Lisbon are the two capital cities of the Iberian Peninsula. Lisbon, the capital of Portugal, is a lot smaller than Madrid—at 500,000 people compared to Madrid's 6.5 million. If it were a Spanish city, Lisbon would rank around seventh in population. Regardless of the size difference, Lisbon is still an essential stop for any visit to the region. The best way to get from Lisbon to Madrid (or vice versa) is by budget flight or the night train. Other options are by bus or car (if driving in Europe is not too intimidating for you).
There are frequent cheap flights from Lisbon to Madrid offered every day. This is the quickest and easiest way to travel between Madrid and Lisbon, and it's often also the cheapest option. Both cities have just one airport, and they are both easy to get to. If you are flying on a budget airline be aware of strict baggage limits and hidden fees.
By Train and Bus
The night train from Lisbon to Madrid takes about 10 hours and is very affordable. While it is a night train, not all of the cars are sleeper cars. If you'd like to sleep more comfortably, seats in a sleeper car can be booked for a higher fare. The train departs from Chamartin Station in Madrid and Oriente Station in Lisbon. The journey takes about 2 hours longer than the bus, but it's a more comfortable ride. If you're going to spend that long sitting down, you might want to add a couple of hours to the journey and enjoy the extra comfort. Trains are also a great option for travelers who want to walk around a bit during the journey.
The bus from Lisbon to Madrid is run by ALSA. The journey takes around eight hours and costs just a bit less than the train. The bus departs from Lisbon Oriente Station and arrives at both Madrid Mendez Alvaro and Madrid Avenida de America Stations. Buses from Seville to Lisbon are bit quicker (taking around seven hours), and if Seville is also on your itinerary and you prefer to travel by bus, you might consider going from Lisbon to Seville first and then Madrid from Seville.
Stops en Route
If you're traveling by train, your main stops en route are in Salamanca in Spain and Coimbra in Portugal. However, because this is a night train, you will get to these cities at awkward times and aren't likely to even be awake to get a glimpse of them.
If you're traveling by bus, you have a few more options for routes and time of day. A good choice would be to go via the Roman ruins of Merida. The allows for more flexibility and you'll like be able to see the countryside pass by on the ride.
The 390-mile drive from Lisbon to Madrid takes a little more than six hours on the A6 and A5 roads. The advantages of driving are universal: you can stop wherever and whenever you want, you are in full control of your schedule, and you have automatic access to a car when you get to your destination. It all adds up to the freedom of the road and the adventure of a road trip, in itself an appealing reason to drive.
If you choose to drive, you should be comfortable driving in a foreign country with limited English signage. Also be prepared for a language change and different rules of the road when you cross the Spain/Portugal border. Before setting out on your journey make sure you're well acquainted with the driving practices of both countries and have your route mapped before getting in the car.