Goals from Tiago and Saul Niguez gave the hosts a commanding half-time lead before Antoine Griezmann and Mario Mandzukic rounded off a famous victory.
Madrid have now failed to beat Atletico in six meetings this season and could see their lead at the top of La Liga cut to a single point if Barcelona win at Athletic Bilbao on Sunday evening.
“It is easy to analyse this game because Atletico were better in every facet of the game: they fought more, had more quality on the ball, had better organisation, everything,” said Ancelotti.
“It is the worst game we have played since I have been coach. We will reflect on it in the coming days with a cool head. We will suffer a lot from this defeat, but we need to change this attitude and avoid it happening in another game in the future.
“We failed at everything, we lost all the tackles, all the high balls. We didn’t have one player who played well.”
World Player of the Year Cristiano Ronaldo, who returned for the match from a two-game suspension, was united with Ancelotti in his criticism of the team.
“Real Madrid cannot lose 4-0 against anyone,” said Ronaldo. “We lacked desire, attitude, everything. The team wasn’t fresh mentally or physically, but there are no excuses. The damage is done.
“This can serve as a lesson for the future. We are still leaders, but we know we have to fight until the end.???
After losing out to Atletico in the league back in September, the European champions reeled off a 22-game winning run and Ancelotti is looking for a similar reaction from his side’s humiliation at the Vicente Calderon.
“We have to modify the attitude, but we have to remember we are still top of the league,??? he said. ???It was a terrible game, but I have confidence in the players.
“We had a very good reaction after losing (to Real Sociedad) at Anoeta and I am sure we will do now.”
Atletico boss Diego Simeone, meanwhile, could only thank his players for delivering a first league double over Madrid since 1951 in such stunning fashion.
“I thank the players for the afternoon that they let us experience,” said Simeone. “I always insist that the players are the most important people. Today their capacity to understand what we needed and execute it was fantastic.”