The Blues captain returned at West Ham on Saturday after sitting out England's double-header against Bulgaria and Switzerland with a hamstring injury, prompting inevitable questions over his commitment to the national side.
But Italian Ancelotti says he has encouraged Terry, who turns 30 in December, to be honest about his injuries rather than put his body on the line as he has done in the past.
"Terry took the right decision with the national team," said Ancelotti.
"He was not 100 per cent and there might have been a problem if he'd played for them. Together, they took the right decision.
"He is a player with a strong character. He's generous. He loves to play for the shirt.
"But, also, he has to be realistic. This is the first time he's had this kind of problem."