Lampard, after leaving Chelsea for New York City FC, is in talks with City about a six-month loan.
Former Chelsea manager Ancelotti said: "I didn’t know this. I'm really surprised because I thought he was coming here to play in USA to play.
"It’s too late for me to take him to Madrid but I'm really happy for Frank as I have a good memory of him. I wish him luck. He’s a good signing for Man City."