Ancelotti, who is now in charge of Ligue 1 club PSG, was at the Chelsea helm when the club signed Torres for £50 million from Liverpool in January 2011.
The Spain international, 27, has struggled for form since the move, scoring just five goals in 41 appearances in all competitions.
Torres' poor form has led to suggestions Chelsea could cash in on the forward, and on Tuesday Ancelotti claimed his side PSG have been offered his services.
But Ancelotti believes current Chelsea manager Andre Villas-Boas' solution is to retain Torres and sell his strike partner Drogba, who turns 34 in March.
"Coaching Chelsea in the midst of a major generational change is complicated," Ancelotti is quoted as saying in the Express. "Look at Torres and his crisis. If you decide you are going to invest in him, you have to sell Drogba.
"Didier is like Pippo Inzaghi at Milan. He tends to swallow up all his competitors. It is not because they are evil, they are just like that."