The Italian is full of praise for the experienced midfielder and wants him to stay put, while confirming that Cristiano Ronaldo remains their first choice for set-pieces
The midfielder's current deal is due to expire at the end of the season but the Italian stresses that Alonso remains a key figure for Madrid and hopes that the 32-year-old will sign an extension before the end of the year.
"I would like Xabi Alonso to sign a new deal as my Christmas present," Ancelotti told reporters.
"He is a key player for Madrid. He has a lot of experience and quality and is very important to the team.
"Xabi Alonso reminds me a bit of myself, although his passing is better and he has better technique as well."
Ancelotti then went on to make it clear that Cristiano Ronaldo remains Madrid's first-choice free-kick taker, regardless of Gareth Bale's strike against Galatasaray.
"Cristiano remains the first choice," he confirmed. "Bale also agrees that Ronaldo is our best bet for free kicks from close range."