Ancelotti's Real Madrid side must knock out the European champions if they are to progress to the final in Lisbon next month after they were paired together in Friday's semi-final draw.
The La Liga title hopefuls will have home advantage in the first leg on Wednesday April 23, with the second leg taking place at the Allianz Arena six days later.
Bayern have been in imperious form this season and may benefit from having already clinched the Bundesliga title, whereas Real remain locked in a three-way battle for the La Liga crown with Atletico Madrid and Barcelona.
In his press conference on Friday, Ancelotti paid tribute to the strength of the Bavarian giants and hailed their coach Pep Guardiola.
"Guardiola is one of the best coaches in the world," he said.
"They have a great team. The semi-finals against Bayern will be very difficult but it's not easy for anyone to play Real Madrid either.
"If we want to win the Champions League, we then have to beat everyone including Bayern."
Real have been hit by the news that Cristiano Ronaldo has suffered a slight thigh injury, with the Portugal captain a major doubt for next Wednesday's Copa del Rey final against Barca.
"I don't know if he will play on Wednesday," said Ancelotti. "We have to wait and see.
"He has a small injury. He could feature in the Copa del Rey final but we won't take any risks."
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