The former Chelsea manager worked with Pirlo during their time at AC Milan, and is currently coaching the Brazil-born midfielder at Paris Saint-Germain.
The 52-year-old believes that the two players compliment one another well, and could prove a fruitful partnership for their country during the course of Euro 2012.
"If Thiago Motta was at Milan when I was there, then I would have always used him alongside Andrea Pirlo," he told Corriere Dello Sport.
"Cesare Prandelli's decision is perfect. Thiago can play anywhere in midfield, including to the left of a strong central player like Pirlo.
|4/1||Italy are 4/1 with bet365 to beat Spain in their opening match of Euro 2012.|
"Motta has brought intelligence, personality, experience and a desire to win with him to PSG. He's a great professional and he's formidable at breaking into space from midfield."
Italy begin their Euro 2012 campaign with a mouth-watering fixture against reigning champions Spain, and Ancelotti feels that Prandelli's men have what it takes to go all the way in Poland and Ukraine.
"We won't begin the game against Spain as a beaten side," he said. "I know how it will end: they'll keep the ball, and we'll hit them on the break.
"Italy can get to the final, even if everything will have to go right. Spain became Spain four years ago by beating Italy on penalties in the last eight. It doesn't take a lot to change history."
Italy will also have to contend with Croatia and Republic of Ireland in Group C.