The mega-rich French club, who have David Beckham among a star squad, have been drawn against the Spanish giants in the quarter-finals after knocking out another La Liga club, Valencia, in the last 16.
A Lionel Messi-inspired Barcelona gave an indication of their immense talent when coming back from a 2-0 first-leg defeat by AC Milan to win 4-2 on aggregate.
And Ancelotti is well aware of the challenge, as he told BeIn Sport: "I think it's brilliant to play Barcelona.
"I'm very happy but it'll be very difficult. Barca have a lot of experience, quality and confidence. But PSG have a chance of going through. We'll have to play the full 180 minutes."
The draw between Real Madrid and Galatasaray will pitch Jose Mourinho against former Chelsea colleague Didier Drogba and the Turkish club know they will have to be at their best.
"Once you're in the quarter-finals, all teams are strong," said Galatasaray vice-president Ali Durust. "But Real Madrid are above all teams.
"If you raise your targets high, then you need to rise to the challenge of such teams."
Elsewhere, Bayern Munich will take on Juventus in the two legs of their quarter-final between two of Europe's historic heavyweights.
"They have real calibre," said Bayern coach Jupp Heynckes. "Juventus are a really tough opponent.
"I know them very well, these will be big nights. At the moment, they are the best team in Italy, very strong in defence and with plenty of quality in attack."
Juve are back in the quarter-finals for the first time in seven years and club director Pavel Nedved said: "After so much suffering we're finally back among Europe's elite and for this we are happy and proud.
"We'll be going into this tie with an open mind and with humility but knowing that we will be able to rely on our own qualities."
Champions League debutants Malaga have been handed the daunting challenge of facing Borussia Dortmund, who are among the favourites to win the competition.
But Dortmund chief executive Hans-Joachim Watze is wary about complacency, as he said: "There are no easy matches in the quarter-finals.
"We'd never underestimate Malaga, especially as they knocked Porto out with a mature performance. We haven't lost any games in the Champions League, I hope it stays that way."