The Croatian international managed only two league appearances for the Foxes this season and Ranieri believes regular playing time ahead of Euro2016 will do the Croatia international a world of good.
"I think in this moment he needs to reinvigorate his mind because in my mind he is a very good player," the Foxes boss said.
"He has very good skills and qualities, but this season is difficult for him to play with me. He can't lose this season because it is very important for him, and for us.
"It is important he goes to the European Championship. It is better for the team, the club and for the player for him to go and play. It is important for him now, in his career, to show his quality. I wish him all the best, he deserves it. He is a very nice boy."