"It is an ugly defeat, because we thought the team was in a good moment," said the Italian. "Today we did not play well, that's why we lost.
"Saint-Etienne played better than us and deserved to win. We did not put rhythm in the game, we did not have good organization, [so] it is normal to lose."
There was further cause for frustration as Zlatan Ibrahimovic was sent off in the second half.
Ancelotti defended the Swedish striker, but also said that his dismissal was not the reason for their defeat.
"The sending-off is not logical, but it was not the problem," he added.
"In the locker room, he said nothing, he was disappointed. But the problem was before, we had difficulties, we had no rhythm.
"Maybe the game Wednesday night took away some things. Maybe this is a good lesson for the future."
Les Parisiens still remain three points ahead of second-placed Toulouse.