Italy have been on the hunt for a new manager since sacking Gian Piero Ventura back in November following the country's failure to progress through to the 2018 World Cup after a surprise play-off defeat to Sweden.
Ancelotti enjoyed league and Champions League success with Real Madrid and AC Milan during his spells in Spain and Italy respectively. "However, I think that he likes the idea of being the national team manager." .
The former Chelsea boss has been out of football since he lost his Job with the German Champions Bayern Munich following a disastrous start to the campaign that culminated in a 3-0 loss to French giants PSG.
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Costacurta is reported to have offered Ancelotti, who has also been linked with former club Chelsea and the soon-to-be-vacant job at Arsenal, a free hand in choosing his staff.
Both Ancelotti and Costacurta previously met in London last month to discuss the role in detail.
Ancelotti was sacked by Bayern in September but remains under contract.
Concise News learnt that the Italian who was sacked by German side Bayern Munich last summer, is strongly preferred among other top coaches as Roberto Mancini, Claudio Ranieri and Antonio Conte who are also linked to the role.