Real host Barcelona at the Santiago Bernabeu this weekend in what is arguably the biggest club game in world football.
But Ancelotti may have to manage without the Portugal international, who has picked up a knock.
"Pepe has taken a knock, but if he recovers well from that blow, he will play," Ancelotti said.
Barca come into the clash top of La Liga, having only dropped two points from their eight matches, with Luis Enrique's side yet to concede a goal.
Real are four points behind in third and Ancelotti, who delivered the club's 10th European Cup in May at the end of his first season in charge, has expressed his wish to retire in the Spanish capital.
"I would like to finish my career at Real Madrid," he said.
When asked if he would ever consider coaching Real's fierce rivals Barca, the Italian was unequivocal in his response.
"No, I would not, out of respect," he said. "I've got to respect my history and the history of the clubs I've trained."
Saturday's clash throws together some of the most devastating attacking players in the world game, including Luis Suarez, who is available for Barcelona after serving a four-month ban for biting.
"I think it will be a spectacular match, there is in the other party such quality," Ancelotti said.
"It is always difficult to play against Barca, but I'm confident that the team will play well.
"I do not understand why we play at six [local time] in the afternoon. Six in the afternoon is not a good time because people are in the park."
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