The German midfielder – who helped his nation to World Cup victory this summer – has been heavily linked with a switch away from the Bernabeu in recent weeks, with his contract now in its final 12 months.
Khedira is rumoured to be ready to leave on a free next year, but Real have been linked with a sale now to get in £8m for the 27-year-old.
This has alerted Chelsea and Arsenal, but both sides are set to miss out on the rangy star after Ancelotti ruled out an exit:
“Khedira is happy here and he is staying,” he is quoted by Goal. “The matter is resolved & he stays at Real Madrid.”
Arsenal were thought to have been on the verge of sealing a deal for Khedira earlier this summer, while Chelsea have been linked with a move thanks to Jose Mourinho’s solid relationship with the player.
Bayern Munich have been mooted as frontrunners in recent days, with reports also suggesting Manchester United are looking.