James scored his first goal for the Blues in yesterday's 5-2 rout of West Brom.
"He scored his first goal in the Premier League, this is the most important part," said Ancelotti.
"It was the key goal of the game. He scored a fantastic goal and a fantastic assist in the second half.
"He is comfortable with the team and everything is OK. In this moment he is using his quality.
"This is the quality I saw at Madrid and the same quality I saw at Bayern.
"The quality of James makes him play easy. His football is not so complicated because when he gets space he likes to use his quality on passes and when he has no space and is under pressure he tries to play simple.
"This is what every player has to do: use quality when there is space and play simple when there is no space."