According to reports from Globo, the Italian tactician held a crucial video call with the Santos star last Thursday before finalising his 26-man squad.
Joined by technical director Rodrigo Caetano, Ancelotti reportedly informed Neymar that he would no longer be guaranteed a starting place or retain the captaincy.
The former Real Madrid manager explained that he already has a preferred starting XI, and the 34-year-old is not currently part of it.
The discussion also included a strict code of conduct, with Neymar advised to reduce his social media activity to remain fully focused on the tournament.
"He has improved his fitness," Ancelotti explained.
"He will be an important player in this World Cup. He has experience in this kind of competition, the love of our group; he can create a better environment in this group.
"We chose Neymar not because we think he'll be a good substitute. We chose Neymar because we believe he can help the team, whether it's for one minute, five minutes, 90 minutes or even taking a penalty."
Despite the tough stance, Ancelotti believes the forward can play an important mentoring role for Brazil’s younger players during the World Cup campaign.