Sergio Ramos scored a brace of headers in four first-half minutes before Cristiano Ronaldo made it 3-0 before the break to essentially end the semi-final as a contest.
Ronaldo added another in the final minute to give Los Blancos a 4-0 win on the night, after a 1-0 victory in Madrid last week, and Ancelotti could not hide his delight at his team's display.
"Unbelievable, I'm really happy," he told Sky Sports News. "I think the first half was fantastic. We did really well defensively, offensively, with the ball, without the ball. It was a perfect game I think, the first half.
"I think the key of this game was the job that all the players made together. When we have this kind of thought from everyone, when you have quality, I think that this is the key to the game.
"We tried to do a little bit more than what we did in the first game. To put more pressure in front, to play quickly because we have this kind of quality. Everything was good."
Real will now go to Lisbon on 24 May in search of a 10th European Cup and they will face either Chelsea or Atletico Madrid. Both of those fixtures will be draped in history with Ancelotti either facing his previous employers or leading his team into a Madrid derby but the Italian is not concerned with who they may face.
"Chelsea have a lot of experience for this kind of game," he said. "On the other side, Atletico are a team with a lot of enthusiasm at this moment but it doesn't matter."
Gareth Bale provided the assist for Ronaldo's first goal and the Welshman was quick to admit that these occasions were the driving reason why he wanted to make his world-record move from Tottenham in the summer.
"This is why I wanted to come to the biggest club in the world: to win trophies, to be in massive games," he told Sky Sports 1. "We still haven't won it yet, we've still got a difficult game in the final whoever it may be and we're looking forward to it."
Ronaldo's two goals took him to a record 16 for a single Champions League campaign and Bale is now hoping the Portuguese can fire Real to European glory.
"That's why he's the world's best player. It's an honour to play with him, to learn off him," he added on Sky Sports News. "But we've got one match to go and hopefully he can score a few more goals."
Guardiola bemoans lack of possession
Bayern boss Pep Guardiola came in for some criticism after the first-leg defeat with some suggesting that his possession-based brand of football was ineffective against Real.
But the former Barcelona boss was insistent following the second leg that a lack of possession had hurt his team and that had stopped them from controlling the game.
"The reason for the defeat is that we played too little with the ball," he told the club's official website. "In Manchester and also in Madrid, we have made it outstanding, not today.
"If you do not have control of the game, you have no chance against this team. We played badly, that's my responsibility. We are at the highest level in Europe and such errors are punished. I'll try to lift the players."