While Mourinho pushed Los Blancos back amongst the world's elite, his massive ego and questionable player tactics ultimately led to his demise. Madrid do not need to start over—the club can continue building on the progress made over the past three seasons.
Ancelotti should be a welcomed figure on the touchline this year. Here is a man who has managed the biggest clubs—and egos—on the planet, with a consistent track record of success.
From his Champions League triumphs with Milan to ushering in a new era with PSG last season, the Italian manager's credentials offer much evidence to his success.
But first-year success is rare, and the pressures of the Bernabeu have proven to be unbearable for many. The addition of new talent will give Ancelotti the tools he needs to accomplish the club's goals, but he will have to overcome several obstacles to do so.
Here are five big challenges he will face.
It was a busy summer for Real Madrid.
The arrival of four new signings—three of which are Spanish—all under the age of 24 represents a slightly altered approach toward building upon their competitive side. These players are all proven, but still developing, creating what is sure to be an interesting dynamic within the squad.
Isco, perhaps the most highly touted among the new members, is an exciting talent capable of playing anywhere in the attack. It just so happens that the current attack features Cristiano Ronaldo, Karim Benzema, Angel Di Maria, Kaka and Mesut Ozil.
This is where Ancelotti's decisions become tough. Including Isco as a regular means that somebody will be left out. Isco would likely be most productive through the middle, but he is unlikely to unseat Ozil. Splitting time with Di Maria on the right looks to be a more likely option.
It won't be any easier for the other signings. Asier Illarramendi and Casemiro are defensive-minded midfielders who must compete with Sami Khedira and Xabi Alonso for time. Dani Carvajal will likely see the field over Alvaro Arbeloa, but that is not quite guaranteed.
Dealing with this young batch of players—and making sure their development isn't stunted on the bench—will be a tough task for Ancelotti. Through clever squad rotation and clear communication, the Italian must guide these new signings through their progression into the side.
A stunning display of dominance put Bayern Munich on top of Europe last season. Their comprehensive attack and sturdy back line were enough to give them both the Bundesliga and the Champions League trophies.
When it comes to opposition, Barcelona have long been standing in Madrid's way. The past two seasons, however, this didn't appear to be the case. Though Barca jumped out to a massive lead in La Liga last season, their defensive form raised questions still waiting to be addressed.
In the Champions League—clearly the most crucial competition for Los Blancos—Bayern represent the strongest opposition.
Their incredible depth and versatility in attack make them a terrifying prospect, one that Carlo Ancelotti must overcome to lift Europe's most coveted trophy. The added members of Madrid's squad give Ancelotti a squad of similar calibre, but surely, the German club will be the favorite heading into this season.
Cristiano Ronaldo will always be the topic of transfer speculation, though this summer was a bit too close for comfort for Madridistas. According to the Daily Mail, Manchester United and others were reportedly preparing bids for the forward, but nothing came to fruition.
After going through a period of supposed sadness last fall, Ronaldo continued his dominance on the pitch, scoring a goal per game in La Liga. The forward replicated his scoring form in the Champions League, ending the campaign as the competition's top marksman.
But Ronaldo's mental state is cause for concern. The fragility he displayed a year ago and his continued hesitation to sign a contract extension leaves Madrid in a tricky situation.
Simply put, Ronaldo is one of the best in the world, and Madrid should meet every demand the player has to keep him on their side. There are just two seasons left on his current contract, which means that next summer would be the last opportunity to sell the forward before he could leave for free.
It appears likely that he is moving toward signing a contract extension, according to Goal.com, but Ancelotti must know that the club's performance this season will be crucial to motivating their Portuguese sensation to remain in the capital city.
Last season's La Liga campaign was one to forget for Real Madrid. The club struggled early, relinquishing the trophy to bitter rivals Barcelona.
A rocky start put the league title out of reach—the competition seemingly over before it had begun. Yet Barca triumphed without a formidable back line. Their porous defense gave up goals far too easily, and reinforcements have yet to arrive.
Madrid should be favored to win the league this season. Their new additions and the arrival of Ancelotti should right the ship and put Los Blancos back on top.
But La Liga is not the main event. Madridistas understand that a league title is important, but quite frankly, it pales in comparison with the Champions League. It is in this way that La Liga must be managed carefully. Clearly a strong start to the campaign will be necessary to stay in contention in the two-horse race, but Ancelotti must accept that the true goal is La Decima.
Madrid now have the squad to operate through the league campaign while still focusing on Europe as the ultimate goal. Ancelotti will need to structure his rotation in order to capitalize on La Liga while retaining focus on the main prize.
Life at the Bernabeu is never easy. Unlike other teams, the outspoken club officials tend to have major influence, sometimes struggling with the manager.
Current president Florentino Perez is a visible part of the club, always finding himself in the headlines. This dynamic will likely remain, but Ancelotti must refuse to bend under the pressure. Jose Mourinho appeared to break down under stress last campaign, and it reflected negatively on the pitch.
Ancelotti will surely be looking for success in his first season, but should remain strong if things don't fall into place immediately. The Italian's impressive background should reinforce his convictions and give him the confidence he needs to deal with immense pressure from Perez and the rest.
If Ancelotti is going to accomplish the lofty goals of the club, he will need their support.