The 18-year-old is yet to make his official first-team debut for Los Blancos, but he has been involved in their preparations for the 2023-24 campaign.
Paz was a second-half substitute in Real Madrid's recent friendly with Manchester United, and various reports have claimed that he has made a big impression during first-team training sessions in the United States.
Los Blancos are currently well-stocked in central midfield, with Jude Bellingham arriving in a big-money deal this summer to boost an already-strong department, but Ancelotti has said that Paz is very much in his plans moving forward.
"Nico is very talented and very young. He looks like a first-team player. We don't want to put pressure on him because he has to improve, but he has the quality to play for Real Madrid in the future," he told reporters.
Paz represented CD San Juan and Tenerife during his youth career before moving to Real Madrid in 2016, progressing through the various age groups before debuting for Real Madrid Castilla in January 2022.
The Argentina Under-20s international has now featured on 24 times for Real Madrid's second team, scoring two goals and registering three assists in the process.
Paz will hope to be involved in Real Madrid's final pre-season game of the summer against Juventus on Wednesday night, with the team then heading back to Spain to prepare for their La Liga opener against Athletic Bilbao on August 12.
"If we're weighing up what we've done so far, it's been good. We've tried a few things and they all went pretty well. We will finish the tour tomorrow and we want to do that as well as we possibly can," Ancelotti told reporters ahead of the clash with Juventus.
"We have to keep going in this vein and then we'll assess whether to continue with it or make a change.
"On a personal level, I'm satisfied. We have to adapt certain things but the players are pleased. Tomorrow is a real test against tough, experienced opposition and it's going to be a great game."
"It's fantastic to be here. We've played some big games against really top opponents. Plus, we get the chance to meet with our fans in the United States. There are so many Madridistas out here who feel immense passion for the club."
Real Madrid have played three friendlies in the United States, beating both AC Milan and Man United, but they suffered a 3-0 defeat to Barcelona in El Clasico last time out.