The coach confirmed he is ready to unleash both the Colombia attacker and Germany midfielder on the Europa League holders for Tuesday's Super Cup tie in Cardiff.
A star-studded Madrid line-up will also include Gareth Bale as he returns to Wales, while Ancelotti said he is confident Cristiano Ronaldo's injury problems are behind him.
The Portugal captain struggled with a knee problem towards the end of last season and was short of full fitness at the World Cup, but Ancelotti believes his star forward is now refreshed.
"James and Kroos will play," he told reporters at the pre-match press conference.
"Kroos has done well in the last five days and will help us because he has a lot of skill. James is a very good player with great qualities who is physically good - I am very happy with his signing.
"We have made a great effort in the transfer market and we have a better team than last year.
"The problems Cristiano had last season are gone and he is in shape. This is a new season for him."
Keylor Navas has also arrived at the Santiago Bernabeu ahead of the new campaign, but Ancelotti refused to reveal who his first-choice goalkeeper is despite confirming Iker Casillas would be between the sticks in Cardiff.
"Casillas deserves to play this game because he had a good Champions League last season," the Italian said.
When asked who his No.1 will be, he added: "I don't know… or I do know but I'm not going to say."