The Italian is confident that an agreement will be reached to keep the midfielder beyond the end of the season and backs Cristiano Ronaldo's bid for the Ballon d'Or
The 32-year-old's current deal is due to expire at the end of the 2013-14 season but a two-year extension is in the pipeline.
With club captain - but current second-choice goalkeeper - Iker Casillas's future also up for question, the Italian is in no doubt over the two World Cup winners' situations.
"Casillas's situation is very clear. He will play in the Champions League and in the cup as well," Ancelotti told the press. "As for Xabi Alonso, I think that we will find a solution and reach an agreement between the club and the player."
The Madrid boss also declared his certainty as to how quiet the January transfer window would be for his side, explaining: "There is nothing new regarding that. No players are leaving and we're not going to sign anyone. The window is closed for us."
Speaking after the Spanish side's winter friendly victory over Paris Saint-Germain, Ancelotti also lent his support to Cristiano Ronaldo's campaign to win the Ballon d'Or.
Asked if the Portuguese was the man for the prize, the Italian replied: "Yes, he's playing very well."