The Italian called time on an 18-month stay at Everton in order to return to the club where he won the Champions League, Copa del Rey and Club World Cup in a spell between 2013 and 2015.
However, Ancelotti inherits a Real squad with plenty of question marks over it.
The Spanish giants have just endured their first trophyless season since 2009-10 and so there is plenty for the 61-year-old to consider as he starts his second stint.
75% - Carlos Ancelotti has won 75% of his managerial games for Real Madrid in all competitions (89 wins in 119 games), the best win percentage of any Real Madrid manager with at least 50 games. Return. pic.twitter.com/JfNwt2QYCH— OptaJose (@OptaJose) June 1, 2021
Sergio Ramos' future
Ancelotti joins a Madrid side who are on the cusp of losing captain Sergio Ramos for nothing. The Spaniard has long been in talks over a new deal but, with his current contract days from expiry, no breakthrough seems imminent.
Although his last season was hampered by injury that has cost him a place at Euro 2020 with Spain, Ramos still proved his worth time and time again.
Looking at his performances in LaLiga, the 35-year-old posted better statistics in tackle success rate (80 per cent) and tackles won per 90 minutes (0.85) than any of his fellow Real centre-halves.
He was also dribbled past fewer times per 90 minutes (0.28) than Raphael Varane (0.3), Eder Militao (0.48) and Nacho (1.03).
These statistics could well be enough to convince Ancelotti to keep him around.
Does Hazard have a role?
With 21 appearances, four goals, and further injury issues all Eden Hazard has to show for last season, it has been suggested a departure could be the best outcome for all parties.
But Ancelotti will no doubt be tempted to try and get the best out of the Belgian as he looks to fix an attack that needs to offer a wider threat.
Karim Benzema remains from the Italian's first stint, but no other Madrid player got close to the French striker's 23 goals in LaLiga last term, with Casemiro (6), Marco Asensio and Luka Modric (both 5) next best.
Hazard could be key to bridging that gap if he can stay fit for long enough periods.
Look who's back...June 1, 2021
What next for returning loanees?
One man who could help on the goal front is Gareth Bale, who scored 11 times in 20 Premier League appearances for Tottenham during a season-long loan stay in 2020-21.
The Welshman first joined Real under Ancelotti in the summer of 2013 and could be more open to staying put with a manager who has faith in him after becoming frustrated under Zidane.
It remains to be seen what happens with Martin Odegaard, who will return from a loan spell at Arsenal where he impressed but perhaps not to the degree necessary to earn a starting place in Madrid.
The futures of Luka Jovic and Brahim Diaz are also uncertain as they return from Eintracht Frankfurt and Milan respectively.
One big sale?
With Real feeling the pinch of a season without supporters, it is likely that the new manager will have to generate his own funds in the transfer market.
And, with moving on fringe players likely to be tricky, the possibility of selling a more in-demand asset increases.
Raphael Varane is one possible contender as he heads into the final year of his contract amid reported interest from the likes of Manchester United.
The Frenchman established himself as a regular starter in Ancelotti's second season and has missed just 68 of the 266 league games played since that point.
Real conceded an average of 1.1 goal per game without Varane across the past seven seasons, and 0.9 in the fixtures in which he featured.
Interestingly, though, their win percentage rose to 73.5 per cent without him in the side from 66.2 per cent with - will these statistics inform the manager's decision?
One big signing?
Money may be tight at Real Madrid, but that won't stop them being linked to the biggest names in world football.
Kylian Mbappe is one of them, the Frenchman having enjoyed another remarkable season in which he scored more goals (21) and landed more shots on target (55) than anyone else in Ligue 1.
The 22-year-old also converted 60.5 per cent of his big chances - a rate that would help ease Real's problems with lack of goals outside of Benzema.
Still, it remains to be seen whether Ancelotti can pull together the funds to start off his reign with such a high-profile signing.