The Italian, whose current contract runs out in 2014, can stay on at PSG beyond this summer only if he guides them to a top-three place in Ligue 1.
"I don't think there is a single coach in the world who could say no to a club like Real Madrid," he told TVE.
"It would be very difficult to turn something like that down. All I can say for now, though, is that I am happy at PSG at the moment."
Ancelotti was appointed the PSG coach in December 2011.