Ancelotti’s return to Stamford Bridge for the first time since he was sacked by Roman Abramovich in 2011 proved to be a bitter one for the Italian.
The defeat to Frank Lampard’s men stretched Everton’s winless run to three games ahead of a difficult run of fixtures against Liverpool, Leicester City and Tottenham Hotspurs.
Everton lie in 12th place but are just six points behind sixth-placed Wolverhampton Wanderers.
Ancelotti could not hide his disappointment after losing to his former side but insists the Toffees can still steal a place for next season’s Europa League.
"Everything went wrong," said Ancelotti.
"It's not difficult to judge this game, to analyse this game. We were not good enough defensively.
"We were too open, not compact, lost a lot of duels, and with the ball we made a lot of mistakes on passes. So it wasn't a good game. Not a good day, but we can learn from our mistakes.
"Honestly, it's the first time, the first game where we didn't compete. Usually, in the other games, also we didn’t win but we competed until the end of the game.
"We've never talked about Champions League. This team was close to relegation. We are still there, six points from the Europa League. We have to fight for this."
