The Spain international is out of contract in the summer and was unwilling to discuss an extension while he was out injured, but he now looks likely to commit himself to the club
Real Madrid are confident Xabi Alonso will sign a new two-year deal to remain at the Santiago Bernabeu.
The midfielder's current contract expires in the summer and the Spain international was unwilling to discuss an extension during his time out through injury.
Xabi underwent two operations in the summer to correct a groin problem and a fractured metatarsal, missing Spain's Confederations Cup campaign in June and the start of the season with Madrid.
Alonso was sidelined for five months in total and believed it would not be fair on the club nor on himself to discuss a new deal while he was out of action.
"Now is the moment to begin to talk to the club about my future," the Basque said after making his comeback at the end of October.
"While I was not fit I did not feel up to talking. I have good communication with the club."
Alonso, who turned 32 last month, was worried he may not be able to rediscover his best form following the injury lay-off, but has since shown his importance to the team and added much-needed balance to the Madrid midfield in recent weeks.
Talks are now underway on a new deal, which is likely to be one year with the option of a second season, and Madrid are prepared to pay the midfielder up to €6 million after tax per year in a bid to keep the Basque (who currently earns around €4.5m) at the Bernabeu beyond next summer, placing him in a wage bracket similar to skipper Iker Casillas and France forward Karim Benzema.
Ancelotti admires Alonso's tactical awareness and leadership abilities and has told Madrid he sees the Basque as fundamental in his plans over the next two seasons.
"I see myself in Xabi Alonso," the Italian said last week. "He is slow like me, but he has more quality in his passing. He is the key to our midfield.
"The club are talking to him about renewing his contract and I hope he is happy to stay. His renewal would be the perfect Christmas present."
Meanwhile, Madrid are monitoring Borussia Dortmund's Ilkay Gundogan as a possible replacement for Alonso, but are now confident the former Liverpool playmaker will put pen to paper on a new deal in the coming weeks and are unlikely to move for the Germany international if their influential No.14 renews his current contract.
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