Los Blancos remain ahead of Barcelona in the La Liga table, but missed the chance to open up a seven-point gap on the current champions with just nine games remaining.
"The league race is still open. We need an immediate reaction," Ancelotti told reporters at a press conference.
"I've said it many times: the league will be decided in the last match. We have to continue fighting. We need to react.
"I haven't spoken to the players about the match yet. We committed small mistakes and that's why we lost. The team is ready to get up and move on. We have to be satisfied with how we played."
Next up for Madrid is a trip to Sevilla on Wednesday.