According to the Daily Express, the talented Spain international has been the subject of interest from Liverpool and Arsenal, with both Premier League clubs monitoring his availability after a hit and miss first season in Madrid.
Liverpool transfer update
Competition for places
The addition of Toni Kroos and James Rodriguez over the summer did little to dampen speculation that Isco would be surplus to requirements.
He has made 36 league appearances for Real Madrid since his move from Malaga for €28m (£24m), but a significant number have been from the bench and he's rarely involved in the big games.
But Ancelotti has wasted little time by ruling out a January departure for Isco, insisting that the midfielder's future remains at the Bernabeu.
Ancelotti keen to keep Isco
"He had a great season last year and we have a lot of faith in him. He is the future of this squad.
"Isco and Illarramendi have a lot of personality and respect my decisions. They are always ready to play."
Liverpool fans would have been salivating over the prospect of Isco alongside the likes of Coutinho, Mario Balotelli, Danny Sturridge and Raheem Sterling. He would be the perfect addition to Brendan Rodgers' system.
Arsenal meanwhile, have plenty of options in Isco's preferred attacking midfield position. Such is their strength in depth, £42m man Mesut Ozil has often been used on the flanks, with Santi Cazorla, Alexis Sanchez, Alex Oxlade-Chamberlain, Aaron Ramsey, Joel Campbell, and Serge Gnabry all competing for places.
Real Madrid's slow start
Real Madrid got their league campaign back on track after surprisingly losing two of their first three games.
Defeats to Real Sociedad and Atletico Madrid had put them in an early hole as far as the title race is concerned, but Madrid bounced back with a massive 8-2 away victory over Deportivo on Saturday.