The former Real Madrid boss has backed Jurgen Klopp to do well at Anfield.
The Italian is currently out of work having been replaced by Rafa Benitez at Real Madrid in the summer.
He was widely linked with the Liverpool job when Brendan Rodgers was sacked a month ago, but ultimately the Reds board decided to hire German Jurgen Klopp.
Ancelotti has since denied there was ever contact between himself and Liverpool’s representatives and maintains that stance, but has admitted that he would have said 'yes' if he had been asked to take over from Rodgers.
“I would like to come back to work in England, and I would like to be with a team that is competitive in England and in Europe,” he told the Daily Mail.
“I did not speak with them [Liverpool]. If I spoke with them then I can say ‘yes’, but no, I did not.”
Ancelotti has, though, backed the Liverpool board’s decision to hire Klopp as Rodgers’ replacement.
The former Borussia Dortmund manager was hot property after leaving the Bundesliga side at the end of last season, such was the impressive job he did there.
His appointment at Anfield has been greeted with much enthusiasm by fans, pundits and players, with him so far enjoying a solid start to life in the Premier League.
And Ancelotti believes he has a strong squad to work with, adding that an experienced player could make all the difference to the side.
“They made the right appointment in Klopp,” he added.
“I think Liverpool are a good team. They have some really good young. If they can find an experienced player like Gerrard or Carragher — an example to the squad — I think they can be really competitive.”