The 20-year-old has been out of action since November 9 and has been struggling with a recurring knee injury but looks set to take his place in the centre of defence for the trip to Vicente Calderon on Wednesday.
Real will take a 3-0 first-leg lead into the semi-final and are favourites to progress but the game will be an important step for Varane as he looks to get his career back on track.
Ancelotti told reporters that the France international star will return in midweek and was full or praise for the talented stopper.
"Varane will play tomorrow because he is fully recovered and it is important for him to be part of the competition," he said. "He has everything to be a great centre back: quality, speed, tactical knowledge, good positioning and enthusiasm. It is great that he is back with the team."