The 21-year-old moved to the Bernabeu from Malaga at the start of the season, and has featured in the majority of Madrid's games as they continue to chase glory on three fronts.
The midfielder has nine goals from 34 appearances in all competitions this term, and Ancelotti believes he could go on to become as successful as Seedorf, who Ancelotti managed at Milan between 2002 and 2009.
"He played very well against Schalke, Atletico Madrid, and very well with his national team," said the Italian of Isco.
"I'm confident he can perform this role - in the past I had another player very similar to Isco, he had a lot of quality.
"I'm talking about Seedorf, an attacking midfielder just like Isco who played this role and was key for Milan.
"Isco can do the same because he is 10 years younger than Seedorf was."
Ancelotti also took time to comment on the actions of Asier Illarramendi, who has apologised after a video emerged of the player apparently running in front of a horned cow at a festival dressed as Batman.
"He has apologised and that's that," said Ancelotti.
"We have an internal rule designed to prevent players going skiing and other dangerous things, but I have never known it applied to bull fighting."
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