"Ozil wasn't comfortable. I knew he'd been speaking with another club because he wanted to leave, Ancelotti told Onda Cero.
"Mesut understood that he had competition, that he wouldn't be able to play every game, and 'I'm off' was his answer.
"I prefer to have [Angel] Di Maria for the team's balance. Di Maria is better than Ozil for group dynamics."
Ancelotti then went on to voice his opinion that Cristiano Ronaldo deserves to win the Fifa Ballon d'Or following his fine performances this year.
"It's simple. For me the best player right now is Cristiano," he continued.
"He's the top scorer in the league, the top scorer in the Champions League and if we talk about technical quality he is the best.
"He has a great professionalism and seriousness, before and after training. That is the key to be at his level. He has not missed a minute [of training], nor does he want to."
Ancelotti also believes Gareth Bale - who joined Madrid in a world-record €100million deal in September - has what it takes to emulate Ronaldo as he's approaching peak fitness.
"Bale can follow in Ronaldo's footsteps," he said.
"Many players had great problems in Madrid when they first joined. I am told the Bernabeu even whistled [Zinedine] Zidane initially."
Bale has scored four goals in nine appearances for Real Madrid so far.
