A revamped Barca, spearheaded by new signing Robert Lewandowski (34), have won seven consecutive LaLiga matches and share the lead at the top of the standings on 22 points with Spanish and European champions Real.
However, their dreadful results in the Champions League have taken the shine off their domestic form and a 3-3 draw against Inter Milan on Wednesday left them on the verge of elimination from Europe's elite competition at the group stage for the second straight season.
Barca have won only one of their four Champions League group matches and if Inter win against minnows Viktoria Plzen in their next match it will be curtains for the Catalans.
Crashing out at the group stage again would be a huge blow to Barcelona's finances, whose perilous state led the club's board to sell a stake in their TV rights and agree the sale of their audio-visual division.
As part of this year's budget, presented to the club's Assembly of Committee Members last Sunday, the board predicted that Barca would reach the Champions League quarter-finals and win the LaLiga title.
A bold and optimistic view that a few days later appeared somewhat detached from reality, with Barcelona now facing a possible 40 million euros blow to their 2022/23 income should they exit the Champions League.
They now face an in-form Real Madrid who cruised into the Champions League knockouts with two games to spare after a 1-1 draw at Shakhtar Donetsk on Tuesday.
Carlo Ancelotti's unbeaten team have begun this campaign where they left off last season when they won the Champions League and LaLiga double.
They will host their bitter rivals on Sunday with a practically full-strength squad, with goalkeeper Thibaut Courtois (30) set to return after missing the last four games with back spasms.
Barcelona arrive with their morale dented and with several key players nursing injuries, mainly in defence where Ronald Araujo (23), Andreas Christensen (26) and Jules Kounde (23) are all out.
Barcelona, however, showed in March that they could spring an upset on their rivals when they delivered a 4-0 thrashing at Santiago Bernabeu when Real were on top of their game.
That result ultimately had little impact as Ancelotti's side won the title with weeks to spare, but this season’s race is much tighter.
Sunday’s game will be just the eighth Clasico in history in which both clubs sit level on points at the top of the LaLiga table.
With Barcelona desperately in need of a win to heal their European wounds, Sunday's game will likely be as tense and competitive as any Clasico can be.
