The former Atletico Madrid forward has been touted as a possible January departure from the Ligue 1 outfit, with the Spanish giants reported as a potential destination for the Colombian.
However, Ancelotti, who has a star-studded team with the likes of Cristiano Ronaldo, Karim Benzema and Gareth Bale at his disposal, has stated today that the 27-year-old is not "right" for the Bernabeu.
"He is a great player but at the moment we are very happy with the strikers that we have as they are scoring a lot of goals," BBC Sport quotes Ancelotti as saying. "I don't think at the moment Falcao would be the right player for us."
The Spanish outfit have also been linked with a January swoop for Liverpool striker Luis Suarez, who is in scintillating form in the Premier League.