Bayern favourites for Euro glory, says Ancelotti
While 'La Decima' - Real's future 10th Champions League title - remains the number one goal of the Spanish capital club, Ancelotti played down his team's chances this season ahead of the second legs of the last 16.
Ancelotti believes Bayern, who defeated Borussia Dortmund 2-1 win the 2012/13 Champions League final, could claim a second European title in a row.
Milan were the last club to win two straight titles in Europe's premier continental club competition in 1989 and 1990 but that was back when it was known as the European Cup.
"The Decima is a big motivation for all of us," Ancelotti told Sky Sport Italia.
"We have nine (European Cups), we're all waiting for the 10th and we will do all we can to get it.
"Our rivals? All sides are dangerous. In the quarters onwards all teams are competitive, although Bayern are the favourites."
Real thrashed Schalke 6-1 in Germany last week to claim a huge lead ahead of their last16 second leg in Madrid on March 18.
Ancelotti's side have also improved in La Liga, going 16 games without defeat in the Spanish top flight to claim first place in the table ahead of Atletico Madrid and Barcelona.
But the 54-year-old Italian knows the title race in Spain is far from over with Real a point ahead of Barcelona, while Atletico are two points further back with 12 rounds remaining.
"The league is uncertain, the distances are very small and it's all to play for," Ancelotti said.
"Our growth? We lost time trying to find our equilibrium, it was hard but now we're more solid and doing things better."