Ancelotti, says Le Parisien, has already given a verbal commitment to Real president Florentino Perez for next season.
"There is some sort of verbal agreement with Real Madrid. Both sides want to work together next season," a source close to negotiations stated.
The death of assistant coach Nick Broad has shaken Ancelotti, who he had brought with him from London.
"In the spirit of Carlo, staying at the PSG is now associated with the death of Nick, who was one of his assistants and had come from England to work with him. In this sense, leaving Paris is a way to show his respect to Nick," added the source.