Modric is expected to leave White Hart Lane this summer after recently-appointed head coach Andre Villas-Boas confirmed Spurs are in negotiations with a number of clubs interested in his services.
Real Madrid are believed to be leading the chase for the Croatia international, with Spurs slapping a £35 million price tag on his head.
The high fee will see a number of clubs priced out of a move for Modric. However, with the financial backing of their Qatari owners, PSG have the capability to move for the midfielder.
The diminutive schemer impressed for Croatia during Euro 2012, something that did not surprise former Chelsea manager Ancelotti.
"I did not need to see him [Modric] at the Euros to know how much talent he has," he said.
"I knew his capabilities before. Now he has confirmed his high quality for those who did not know."
PSG have been linked with a number of high-profile players during the transfer window, but Ancelotti insisted he would not be drawn into discussing any possible move for Modric
"I am sorry to disappoint you but I can't speak publicly about the transfer market," he told AS.com.
"You have to understand that it would be foolish of me to speak openly about our objectives and movements in relation to quality players."
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