Liverpool are on the lookout for a new manager after dismissing Brendan Rodgers on Sunday.
Ancelotti is without a managerial job at the moment, having parted company with Real Madrid at the end of the 2014-15 campaign.
Clement, who was appointed the Derby head coach at the start of the season, has a long-standing relationship with Ancelotti, having worked with him at Chelsea, Paris Saint-Germain and Madrid.
The Englishman has explained why the Italian tactician would be a good managerial appointment for Liverpool.
"Would Carlo be suitable for that position? 100%," said Clement when posed the question on Sky Sports 1 on Sunday evening (October 4, 2015) following the game between Atletico Madrid and Real Madrid in La Liga.
"He had a great career as a player and a sterling career as a coach as well in terms of what he has won and the clubs he has managed…
"He has got all the credibility, he is a fantastic man-manager, and he would be a perfect appointment for that club."
Liverpool are 10th in the Premier League table at the moment with 12 points from eight matches, just three points behind fourth-place Leicester City.