Los Blancos had been in suddenly impressive form, and should have dealt with their basement dwelling neighbours from Vallecas comfortably.
But defensive errors from Pepe and Marcelo gifted Rayo two penalties, and had it not been for the brilliance of ‘keeper Diego Lopez, the 3-2 scoreline in Real’s favour could have made for far uglier reading.
Ancelotti knows that such sloppiness will not go unpunished in the Champions League against Juventus tonight.
Real travel to Turin to face an Old Lady with her back against the wall. The Serie A side will play a gritty game because a place in the knockout stage potentially depends on it.
Slamming his team’s defending of late as “disastrous”, Ancelotti said the improvement must be immediate or the price will be costly.
"We're attacking very well, but we're allowing too many goals," he said.
“It's an important game for Juventus but for us it's an opportunity to qualify for the next stage.
“The sooner we do that, the better for us.”
Juve boast a winning home record against Madrid, and their new stadium is a tough nut to crack for any visiting side.
They will take heart that in-form Lopez is likely to make way for Iker Casillas in goal, with the Real skipper desperate to impress in a rare outing.
Defender Raphael Varane is set to return for Madrid, to replace either Pepe or Sergio Ramos.
And Xabi Alonso may be the key to Real’s improved back line, as he is likely to play his first Champions League game of the season, in a deep-lying and defensive role in front of the back four.