The Italian has been on the receiving end of some criticism this season, particularly following their 2-0 defeat to Hoffenheim last weekend.
Bayern did bounce that from that loss with a 3-0 victory over Anderlecht in their Champions League opener on Tuesday but that has not stopped speculation linking Nagelsmann with taking over at the Allianz Arena.
Nagelsmann has revealed it has always been in his 'dreams' to manage Bayern but Ancelotti is taking such talk with a pinch of salt.
"I think it's totally normal that one young manager, good manager like Julian, has a dream to train a top club," the 58-year-old said.
Ancelotti certainly sees no reason why Nagelsmann cannot manage a club of Bayern's stature in the future but he has no intention of vacating his position.
He added: "Also, he's German, it's absolutely normal and last year I told him that maybe in the future I wish him the best to be the manager of a top club."