The Frenchman has been plagued by a leg injury but Los Blancos are hopeful he will be fit to feature at the Santiago Bernabeu.
The 26-year-old striker netted twice in Los Blancos' 6-1 first-leg win in Gelsenkirchen, but a leg injury he picked up against Malaga over the weekend will keep him out of the return leg.
"Benzema can't play tomorrow [Tuesday] but we are confident he will be fit for Sunday," Ancelotti said at a press conference. "Benzema is a very important player, but we are lucky to be able to replace him when he is injured."
The Madrid coach then went on to stress that the game against Schalke is the perfect preparation for the upcoming Clasico.
"Sunday's match will be very balanced," he said. "We have to play well against Schalke because it's a very important match. We have to be consistent. Playing well is the best way to prepare for the Clasico."
Ancelotti also said that a number of players will be rested against Schalke as talented youngsters such as Jese and Alvaro Morata will get the chance to prove their worth.
"We will make a few changes because some players are physically tired. Jese, Ronaldo and Morata will all start," he said. "Isco will play if I don't change my mind. Isco and I are confident he can play well in midfield."