Casemiro will put an end to his nine-year spell with Real Madrid.
The Brazilian midfielder has won five Champions Leagues and three LaLiga titles at Santiago Bernabeu.
He wants a new challenge this summer and wants to move to struggling side Manchester United.
He will definitely receive a substantial wage increase at Old Trafford as United looks to strengthen their midfield options.
“I talked about it with [Casemiro] this morning,” Ancelotti said in a news conference. “He wants to try a new challenge, a new opportunity. The club and I understand it. Casemiro — with what he’s done at this club, and with the person he is — we have to respect this desire he has.
“There are negotiations right now. Nothing is official, he’s still a Real Madrid player, but he wants to leave. If he goes and reaches an agreement, we have the resources to replace him.”
Carlo Ancelotti tried to convince the player to not leave Santiago Bernabeu.
“I just listened to him,” the Italian coach said. “Hearing his desire to leave, there’s no way back … If the negotiations go well and an agreement is reached, we have to wish him all the best and look at what we have.
“It’s hard to speak now, because we don’t know what will happen in the next few hours, whether he stays or goes. But if he goes, we’re hugely grateful to him.”