The Spain Under-21 sensation would welcome the Tottenham star to the Santiago Bernabeu with open arms, saying he would give their Italian coach a welcome selection headache
Los Blancos have already confirmed their interest in the Tottenham star, but have thus far refused to meet the Premier League outfit's asking price of around £100 million.
There has been also been some debate over whether Madrid actually need Bale, but Isco feels the Welshman would represent a most welcome selection headache for Ancelotti.
"If he comes, it would a problem for the coach, but a blessed problem," he told reporters at a press conference on Friday.
"I think what everybody thinks [about him]: that he is a really great player. So, we would welcome him as everyone else has been welcomed [this summer]."
Isco is one of Madrid's most recent arrivals, having joined from Malaga in the summer, and he believes he can thrive at the Bernabeu under Ancelotti's tutelage.
"He's a coach who is always speaking with you," he added. "He is very close to the players and his philosophy is perfect for Madrid.
"The coach asks for possession, good judgment, creativity and high pressing. It's a style that suits players who like to play. We're going to see an attractive Madrid that will do great things.
"We want to do well in all competitions, not just the Champions League. We want to win everything."
Isco admitted, though, that he faces a difficult task in nailing down a regular berth in the Madrid starting line-up.
"I will just try to do my job," he explained. "The adaptation for me has been quick and easy. I'm delighted to be here and eager to do well.
"It's true that at Malaga I played every game as a starter, but here at Madrid, they give nothing away.
"I hope to play a lot and I hope to play on Sunday [in Madrid's Liga opener against Betis] but the coach has the final say."
Isco, who has been capped once at senior level by Spain, played a key role in the country's triumph at this summer's Under-21 European Championship.