Madrid holds an eight-point advantage at the top of LaLiga, while it has already qualified through Group D in the Champions League.
The two top sides meet on Wednesday (AEDT), with Ancelotti's team boasting a two-point lead over Inter, which has not defeated Spanish opposition in Europe since October 2004.
Madrid has also won its last three games in the Champions League against the Serie A outfit, though the pre-match focus was on the latter stages of the continental competition as the Spanish giant looks for an unprecedented 14th title.
"I don't have to prove anything to anyone," Ancelotti said.
"I have a very young coaching staff and also young footballers with a lot of enthusiasm and desire to learn. With this coaching staff, I feel very good because we can combine their enthusiasm and my experience well.
"I can't say if Madrid is the favourite or not to win the Champions League, but we can compete against any team. If you want to win this competition, you have to face the best. If you have the goal of reaching the final, you will have to beat strong teams.
"In the second year of my first stage, we were very close to success. The period between January and February did not go well, we suffered important injuries like [Luka] Modric's. But each year has its history and you cannot compare that with the current one.
"The history and tradition of this club, which is the best in the world, involves a requirement. When we won La Decima we enjoyed it and celebrated it, but we had to move on. This is what this club and this fans are asking for."
Inter head to the Spanish capital after a dominant 3-0 win over Jose Mourinho's Roma moved them within a point of leaders Milan in the league.
Simone Inzaghi's side also know a win will ensure top spot in Group D but Inter have not defeated Madrid away from home in European competition since March 1967.
Ancelotti, though, is expecting a great battle with the Nerazzurri, who have qualified for the knockout stages of the Champions League for the first time since the 2011-12 campaign.
"It is a prestigious game for us," he added. "We play against a team that is doing very well, playing football well.
"We play [for] first place and that is important. And we play in our stadium in front of our fans. It will be an interesting match."