The Premier League match has been overshadowed by the meeting between Terry and City left back Wayne Bridge after a scandal over the Chelsea captain's alleged affair with Bridge's former girlfriend.
The fallout cost Terry his England captaincy earlier this month and Bridge said on Thursday he had withdrawn from the England national side because he could not line up with Terry. Much attention on Saturday will be focused on whether the pair shake hands before the match.
"John Terry is professional. He will not have a problem staying focused on the match," Ancelotti told reporters after training on Friday.
"He's been producing good performances, he's in good condition and I haven't seen a drop in his condition. He focuses and has a good mentality and he will do the same to the end of the season," the Italian added.
Terry and Bridge are former Chelsea team mates. Manchester City coach Roberto Mancini, a former Italy team mate of Ancelotti, has said Bridge will play on Saturday.
The normally calm and collected Ancelotti was visibly irritated at the questioning over the affair and the handshake. "I'm not excited," he said. "In Italy I never came across anything like this.
"I don't know how many people are interested to this. For sure not the players."
Terry's is not the only off-field scandal at Chelsea. Ashley Cole has been plastered across the newspapers after a very public split with singer wife Cheryl following his alleged infidelities.
Chelsea could move four points clear of Manchester United with a win on Saturday. City are desperate for points in the battle for fourth place and a Champions League spot to justify the high spending the club's Abu Dhabi owners have lavished on their new side.
City have taken the mantle of the Premier League's big spenders from Roman Abramovich's Chelsea over the last year but their progress has been erratic. They did inflict a rare defeat on Chelsea in the home fixture last December, however.
"Tomorrow will be a very hard game," Ancelotti said, trying to draw attention back to the match itself. "The last game against them we lost so we have to be at our best".
Chelsea will be without Czech goalkeeper Petr Cech, injured in Wednesday's 2-1 first-leg Champions League defeat at Inter and expected to be out for at least three weeks with a torn calm muscle. Salomon Kalou, who scored Chelsea's vital away goal at the San Siro, must undergo a late fitness test.
With his two left backs Cole and Yuri Zhirkov injured, Ancelotti said he had been impressed with winger Florent Malouda, who played in that position on Wednesday.
Hilario replaces Cech. Fellow Portuguese Deco and Jose Bosingwa are also out injured alongside Ghana midfielder Michael Essien.
