Spurs qualified for Europe’s top competition by finishing in third place in the Premier League last term.
Alli’s performances were a major reason why Tottenham performed so far above expectations last campaign.
And former Real Madrid and Chelsea manager Ancelotti said: "Dele Alli will be playing Champions League football next season and he will be one of the best young players in the competition.”
Alli enjoyed a rapid rise after moving from MK Dons to join Spurs last summer.
The 20-year-old attacking midfielder made 33 Premier League appearances for Tottenham, and he scored on eight occasions.
Alli’s form earned him a place in England’s squad at Euro 2016, but he failed to show his best in France.
Alli, like a number of England’s players, did not manage to play to their potential - as the Three Lions crashed out against Iceland.
Alli started in three of England’s four matches at the international competition, but he struggled to make much of an impression.