Paris Saint-Germain president Nasser Al Khelaifi said that he believes the Italian has signed a deal with the Spanish giants - but warned they will have to pay up if they try to complete the move.
"I think he signed a pre-contract with Real Madrid, but I can’t imagine Real Madrid will make him sign an agreement or there will be a problem in law," he told Al-Jazeera.
"There will be no arm-wrestling. We just respect principles, contracts and what we said we would do.
"You have methods, situations in law and negotiations in order to make everything well."
On Sunday Ancelotti confirmed he wants to leave the French champions after weeks of speculation that Real have lined him up to replace Jose Mourinho.
"I have asked the club to leave and I am waiting for their answer because I am under contract," he said at the Ligue 1 awards ceremony.
Earlier on Sunday, PSG's sporting director Leonardo said Ancelotti had asked to go - in order to take the Real Madrid job soon to be vacated by Mourinho - but the club wanted him to stay.
"Carlo asked to leave for Real Madrid but we want him to stay," he told L'Equipe.
"No decision has been made. Our priority is still that he stays. We have never contacted other coaches."
BeIN Sport, who have television rights for Ligue 1, said on their Twitter feed: "Carlo Ancelotti will not be the PSG coach next season. He met [al-Khelaifi] and Leonardo this afternoon in Paris for more than an hour."
Ancelotti joined PSG, who are owned by Qatar Sports Investments, in December 2011, leading them to their first title since 1994 last weekend.
The 53-year-old boss won league titles with PSG, AC Milan and Chelsea, also taking the Italian club to the Champions League title in 2003 and 2007.
His contract at PSG was automatically renewed by one year until June next year when the club secured a Champions League spot for next season.