Ancelotti warns of Schalke threat to Real
The sides were drawn together on Monday and will do battle over two legs for a place in the quarter-finals.
While Real finished Group B unbeaten, Ancelotti does not want his side to take their Bundesliga opponents, who came second in Group E behind Chelsea, lightly.
"It is a very important competition and we have to be ready and do the maximum," the Italian told Real's official website.
"These are knockout-round encounters, and it is always difficult.
"We have desire and enthusiasm to make the quarters. In the Champions League, in every game (you must) do the maximum, stay focused and motivated. We can not fail in any match in this competition."
Club director Emilio Butragueno admitted he was wary of German opposition, with Real having suffered semi-final defeats to Bayern Munich and Borussia Dortmund respectively in the previous two seasons.
"There were stronger teams in the draw but every time we've played against German opposition, we have struggled," he said.
"We will have to be alert to every detail of this tie. One bad night in Europe will put you out of the competition so we will need to be careful."