With Real Madrid having blown their lead at the top of La Liga following back-to-back defeats, the Italian finds himself under huge pressure to deliver a 10th European Cup to keep his job.
And Tottenham chairman Daniel Levy is monitoring the situation in Spain, and is thought to be keen to offer the former Chelsea boss a return to the Premier League.
Despite Sunday’s 4-0 hammering at the hands of Liverpool, Levy wants Sherwood to succeed as Tottenham boss, and is allowing him to plan transfer targets for next season.
Levy is thought to have distanced himself from Dutchman Louis Van Gaal, after he angered the Spurs chairman with revealing an approach was made before Sherwood was hired.
Ancelotti – who won the Premier League and FA Cup double during his first season at Chelsea, only to be sacked a year later – is seen as an exciting option should Levy decide to part company with Sherwood.