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The Champions League holders have been unable to beat their city rivals in five previous meetings so far this season - drawing twice, while losing the other three - yet Ancelotti remains optimistic about his side's chances of bagging the full three points on Saturday.
"We are not afraid of Atletico," Ancelotti said at a press conference.
"We are not thinking about a draw. We are preparing for games with the intention to win them.
"The team is incredibly motivated. We are high on confidence and we have no doubt that it will be a great game."
Cristiano Ronaldo returns to the Madrid squad after a two-match ban and Ancelotti has stressed the
Portugal international is raring to go, while also praising Isco following his fine run of form.
"Cristiano is raring to go and as motivated as ever after his suspension," he said.
"Isco is absolutely indispensable for this team."
Madrid will have to make do without the services of Sergio Ramos, Pepe and James Rodriguez due to injury, while Marcelo is unavailable due to suspension.
"We are not thinking about the players we are missing. Both Fabio Coentrao and Alvaro Arbeloa can play at left-back," Ancelotti said.
"We believe in Raphael Varane and Nacho Fernandez at centre-back."
Madrid hold a seven-point lead over Atletico ahead of Saturday's encounter.