Ancelotti won Real Madrid’s 10th Champions League crown with the pair in the 2013/2014 season.
The 61-year-old has already been successful in pricing away James Rodriguez from the Santiago Bernabeu and there are rumors he could go back to his old club for more players.
Isco has seen little playing time under Zinedine Zidane this season and he could leave the Spanish capital as early as January for more minutes while Khedira is deemed surplus to requirements under new Juventus manager Andrea Pirlo, having not featured for a single minute in any competition this season.
While Ancelotti admits the pair are great players, he claims reports linking them to Everton are not entirely the case.
“Isco is a rumour from the press, from the media,” Ancelotti said at a press conference ahead of his side’s Premier League clash with Fulham. “It's not a rumour that went out from our side.
"We are not talking about the market in this period, we are talking about the problem that we had and we are working to try and solve this problem.
"Apart from this, Isco was my player at Real Madrid and was a fantastic player. He is a Real Madrid player."
On Khedira, the former Chelsea, AC Milan and Paris Saint Germain boss added: "I have a good memory of Sami Khedira, he was with me at Real Madrid and was a fantastic professional."
"I would love to work with him, but unfortunately he's not the only one! I've had fantastic players in my career, I've had good memories of them.
"But to come here to Everton is another thing to consider."
Seventh placed Everton will look to arrest a recent slump in form that sees them winless in their last four games when they meet Fulham on Sunday.
