The Spain skipper, alienated under ex-boss Jose Mourinho, made his first appearance for los Blancos since January as Cristiano Ronaldo and Mesut Ozil secured a 2-1 win over Everton
The Spain captain played the first 45 minutes in the 2-1 win over Everton in the Guinness International Champions Cup on Sunday and Ancelotti was happy with the 32-year-old's display - along with the other members of the squad still recovering from Confederations Cup exertions.
"I thought he [Casillas] did well. He almost had no work to do and he had no problems," the Italian told a press conference.
"They only played 45 minutes. They did a good job and in the next game they will get more time, so they can keep gaining in fitness.
"We are looking good. Everyone is doing a good job and we still have a few more days to keep preparing ourselves [for the La Liga season]."
Ancelotti also paid tribute to the performance of attacking starlet Jese Rodriguez and stressed there is no competition for places between Mesut Ozil - who scored the game's winning goal - and Isco.
"It’s not a duel. Ozil plays on the right and Isco on the left," he continued. "Both have played extremely well. They have a great ability to play between the lines and look for the best passing options to the forwards. That’s their objective.
"[Jese] also played well. He worked hard and displayed one brilliant piece of skill, it’s just a shame he couldn’t score. He’s a player of real talent."
Real Madrid will face Chelsea or AC Milan following their win over Everton and Ancelotti admitted he is relishing the prospect of facing one of his old clubs.
"I don’t mind if it's Chelsea or Milan," added the 54-year-old. "For me it’ll be a special game because I have coached both sides. I’m sure it’ll be a great game, whoever we end up playing."