Digne, who picked up the injury during training, will undergo surgery next week.
“It’s a big loss because he is a fantastic left back, one of the best left backs in Europe at this moment but we have to manage this,” Ancelotti told reporters before Saturday’s Premier League home game against Leeds United.
Everton captain Seamus Coleman remains sidelined with a hamstring problem, while right back Jonjoe Kenny has not fully recovered from an ankle injury but is available for the game.
“We have a good substitutes in that (full back) position,” Ancelotti added. “We have (Niels) Nkounkou, we have Kenny on the right, we have the possibility to substitute.
“Three centre backs can be an option. Alex Iwobi can play on the left as a wing back without a problem.”
Everton last kept a clean sheet in the league on the opening day when they beat Tottenham Hotspur 1-0 and have conceded 16 goals in eight games since.
Ancelotti said the team must shore up their defence to complement their solid attacking record of 19 goals so far this season as they prepare for Marcelo Bielsa’s 14th-placed Leeds.
“It’s true that we scored a lot of goals in these first games, we were efficient in front because our strikers did really well. But we conceded too much and we need to avoid this, we need more balance,” he said.
“Leeds is a dynamic team. It will be an open match with a lot of intensity. All Marcelo Bielsa teams are like Leeds, they keep high intensity with and without the ball and we expect this kind of game.”