Ancelotti led Real Madrid to their 10th Champions League victory last season but was sacked after finishing behind Barcelona in La Liga and losing to Juventus in the semi-finals of the Champions League.
He has previously said he would take a year off after leaving the Bernabeu, but is now in line to return to AC Milan, who he??coached from 2001 to 2009.
“The deadline for a reply is Wednesday, June 3,” AC Milan??vice-president Adriano Galliani??told journalists after meeting with the 55-year-old Italian at Madrid’s Wellington Hotel.
“Carlo wanted to take a year out, we’re hoping to convince him to accept Milan. He still has some days to think about it, he told me the chances were 50-50.”
During his previous spell with the club, Ancelotti won the Serie A title in 2004 and lifted the Champions League in 2003 and 2007.
“I’ll make my decision on Wednesday,” Ancelotti confirmed, adding that he had “always got on well with Galliani”.
The affable coach had said last weekend he would either stay at Real Madrid or take a year off to undergo surgery on a worsening and urgent health problem.
“I must have a back operation because of spinal stenosis that for some time creates a tingle in my hands,” he told Italian newspaper Il Giornale.
“I don’t know how long the period of recovery will be. But I can assure you that I’ve had plenty of (job) offers from Italy, England, Germany.”
As well as coaching Milan, Ancelotti won the old European Cup twice as a player with them in 1989 and 1990.
Filippo Inzaghi is the current head coach of Milan but looks set to leave at the end of the season.