The Colombia international required surgery on a broken metatarsal sustained in Real's 2-1 victory against Sevilla on February 4.
However, Rodriguez - who moved to the Santiago Bernabeu in a big-money switch from Monaco in July - rejoined training during the international break and will start on Sunday.
"James is fit he will start the game, he's in good shape," Ancelotti said.
Ancelotti is without the suspended Isco, while centre-back Pepe has a slight thigh injury.
Pepe's issue is not thought to be serious, though, and Ancelotti believes that with a fully fit squad Real can overturn the four-point gap to rivals and leaders Barcelona, with the Catalans having triumphed 2-1 in El Clasico before the international break.
"If you look at this season compared to last season we're fitter," Ancelotti added. "We don't have anyone out injured, Pepe has a slight injury but should be back soon.
"We're looking forward to the games between now and the end of the season. We have so many games coming up and we have a fully fit squad. I'll try to rotate as much as possible over this period.
"I have to say we're actually happy now, if you look back at international breaks we've had injuries. Now we've got people fit and it could change the dynamic of the team and our confidence is sky high."
