Hazard, 30, was an unused substitute in Madrid's 2-1 El Clasico win over Barcelona on Sunday after he missed last week's 5-0 Champions League thrashing of Shakhtar Donetsk with an injury picked up on international duty.
"The problem [Hazard] has right now is he has a coach who prefers another player," Ancelotti said in a news conference on Tuesday ahead of Madrid's LaLiga game with Osasuna. "That can happen in a squad like Real Madrid's. What's important is the player has the motivation to work to play. He is doing that."
Hazard has shown some improvements in form and fitness this season after two years disrupted by a series of ankle problems since signing from Chelsea in 2019.
The Belgium international has made seven league appearances this season, four of them starts, but is yet to score. His only goal in 2021-22 came for his country against the Czech Republic in September.
"He has absolutely everything," Ancelotti said. "He has all the characteristics to be a Real Madrid player. He has to keep fighting. Sometimes it happens, there are moments when the coach prefers others.
"Little by little he is getting back to his best version. I'm convinced that this season he will get to his best and will play more than he is playing now."
Ancelotti also expressed sympathy for Barca coach Ronald Koeman, whose car was surrounded by a group of angry supporters after their Clasico defeat.
"I felt for Koeman," Ancelotti said. "It shouldn't happen, we can't tolerate rudeness. It's a social problem, Koeman's right, it isn't just a football problem. It's a lack of respect for the person, not the coach."
He added: "The life of a coach is beautiful, we do what we like to do and that's the most important thing. You also have to accept criticism, but what's annoying is the lack of respect."
Ancelotti also revealed that Gareth Bale had been cleared by medical staff to return to training after suffering a hamstring injury.
The forward will begin training with teammates next week and could be available for Madrid's game with Rayo Vallecano on Nov. 6.