The coach says it is incredibly difficult to pick between "the best two goalkeepers in the world" and that he has no intention of selling off the Blancos skipper,
The Spain international has been out of the Blancos' first team for a year now, having picked up a hand injury in January 2012 and failing to usurp Diego Lopez as No. 1 under Jose Mourinho and subsequently Ancelotti.
"It was not an easy decision. I have two goalkeepers of high quality, the best two in the world," the Italian trainer told RNE. "I started with Diego as my number one, but then did not consider that Casillas would not play. Rotating goalkeepers is not the most desirable thing, it is not easy, but they have understood.
"I'll fight the same way I did for Xabi. This team have key players representing the club and I will wage war for Casillas to finish his career here, in Madrid."
Ancelotti also suggested that Real Madrid may be lagging behind Barcelona and Atletico Madrid in La Liga because of its alteration in style under him from Mourinho's methods the prior three seasons.
"We're not doing as well because we changed philosophy this season," he said. "Last year's Madrid played more on the counterattack, we want to play with more possession. It takes time to adjust.
"It will take a little longer to catch Barcelona and Atletico. I am aware that some people's patience is limited, which is normal because Madrid have to try to win every year. If we beat Espanyol this weekend then we'll have 47 points halfway through the season, which is not bad. But Barca or Atletico could have 52."
Xabi Alonso confirmed he had signed a new Madrid deal in midweek and Ancelotti says the only other player like the Spaniard is Juventus veteran Andrea Pirlo, while praising Luka Modric for improving while the star was injured.
"Xabi is an important signing for his quality and experience," the former Chelsea and AC Milan boss said. "Losing him [would have been awful] because there is not another player like him at his level.
"You can only compare Pirlo, who is 35 years old. Everybody loves Xabi here, he brings more balance to the team. Luka is much improved, though, he has shown his ability."