The 54-year-old says the club have no plans to sell the goalkeeper but admitted Alvaro Morata could go out on loan next season
The 33-year-old was been demoted to the bench in the league this season, losing out on the number one spot to Diego Lopez but remained first choice for the Champions League as the Spanishi giants went on to win a tenth European crown.
As a result of being second in line for the majority of games, Casillas has been linked with a move away from the Santiago Bernabeu, but Ancelotti insists he is staying put.
"We haven't thought about this because once we won the final, everyone went on holiday," he told reporters. "Casillas is very happy to stay here, and we're happy that he's staying."
Ancelotti also admitted that 21-year-old Alvaro Morata could go out on loan for a season. The youngster was forced to settle for a place on the bench this season, something Ancelotti admits was a source of frustration for the youngster.
Arsene Wenger has been constantly linked with a move for the Spaniard and it was revealed in January that the north Londoners had turned their attention to Morata as a deal for Julian Draxler evaporated.
"If he could find the chance of playing it would be good that he had the chance for a year," Ancelotti said.
"If Morata goes then we'll have to think about signing a similar striker with the same characteristics, a youngster."
The 54-year-old also shed some light on other transfer rumours, insisting that Angel Di Maria is loved by Madrid and says there is no great need for midfield reinforcements this summer because of Sami Khedira's return to fitness.
"I think that Di Maria knows everyone loves him. The boss loves him, the club does and so do the fans. I think he knows this.
"I think we've got to remember that this season we were without Khedira, who has recovered well and will be back with us. The level of the central midfielders will improve with his return. Then we'll see. He's a great player."