James, 29, sustained a minor calf problem in last week's 1-1 Premier League draw at Burnley and has not trained this week.
Everton has lost its past two home games against Leeds United and Manchester United, dropping to ninth in the table after topping the standings in the early stages of 2020-2021.
Ancelotti has not lost three straight home league games as a manager since 2006 with AC Milan, while March 2016 was the last time it happened for Everton.
It will now try to avoid that fate at Goodison Park against an in-form Chelsea side which sits third in the table.
"We have James out – he had a little problem in the game against Burnley," Ancelotti said.
"He was not able to train this week, I think he will start to train next week. For this game, we don't want to take a risk.
"He had a charge on his calf muscle after the game against Burnley. Nothing special, but he was not able to train.
"We have to look at him after the game to see if he will be able to train and play against Leicester [City, on Thursday AEDT]."
As well as James, Everton boss Ancelotti ruled out captain Seamus Coleman and midfielder Fabian Delph, who had both hoped to feature, while Lucas Digne and Jean-Philippe Gbamin are longer-term absentees.
"I'm not used to complaining about the players who are not available," the Italian added. "The players who are available trained well and are in good condition.
"We understand that there will be an important moment and test, not only on Saturday [Sunday AEDT] but in this period of December.
"So, I think we arrive at the game with confidence and motivation."
Ancelotti will do battle with his former player, Frank Lampard, who impressed under his stewardship at Chelsea.
He was in charge of 76 Premier League games with Chelsea from 2009 to 2011 and Lampard played in 60 of those, scoring 32 goals.
Only under Jose Mourinho did Lampard score more in the Premier League (49 in 140 appearances).