It is a manager switch that has shocked the whole of Europe as Real Madrid have had several names linked with them and Ancelotti seemingly was not in the conversation with the Italian preparing for a new season with Everton.
Antonio Conte, Mauricio Pochettino and former Real Madrid striker Raul were all the favourites for the Los Blancos job hence why it is such a shock that Ancelotti has joined the cub he managed six years ago.
Ancelotti signed a four-and-a-half-year contract when he joined Everton in 2019 and he had been hinting over the course of the season about renewing that deal so he could manage the club when the new stadium is built.
Clearly though the one-time Premier League winner did not have those intentions as at the first opportunity he had had to leave Everton he has jumped ship which is such a surprise considering how much he has openly expressed his joy about managing the club.
According to various reports Ancelotti arrived in Madrid on Friday to begin discussions about joining the 13-time European champions.
The Italian will sign a three-year-contract with Florentino Perez having supposedly convinced him to come back to the club.
He said: “I have complete respect for everyone associated with Everton and hope they can achieve the exciting opportunities they have in front of them.
“While I have enjoyed being at Everton I have been presented with an unexpected opportunity which I believe is the right move for me and my family at this time.”
In his two years at Real Madrid Ancelotti won four trophies with the biggest of the lot being the Champions League but this time around he will be in charge of a crucial rebuild of the club.
His agents and representatives were working hard to terminate his contract at Everton according to Fabrizio Romano to hurry the process along.
Reliable journalist Paul Joyce has reported that the first three names on the shortlist to replace him are Eddie Howe, Nuno Espirito Santo and David Moyes.
Whilst The Athletic are reporting that the board at Everton are in discussions about bringing Liverpool legends Steven Gerrard or Rafa Benitez to the club.
Eddie Howe has been in talks with Celtic for weeks but that deal fell through just in time for him to be the favourite for the Everton job, so it seems to have all fallen into place.
Howe is not a big name though however he is young and will want to take on the project at Everton having spent so many years at Bournemouth.
Everton need to not panic as this manager appointment is one of the most important in their history as they thought Ancelotti was in it for the long haul so it will have caught the hierarchy off guard.
It will be a vital few weeks which could already shape the new season for the blues as it will also leave the future of players hanging in the balance with the likes of James Rodriguez and Allan joining the club due to the fact Ancelotti was in charge.
A massive blow to Everton with the season only finishing nine days ago could end up being a massive blow to the new season even though it has not even started yet.