"Transfer agreement for Balotelli signed with Manchester City," said Milan director Umberto Gandini on Twitter. "Medicals tomorrow in Milan, then personal terms until 2017 signing."
It is believed Milan have agreed to pay around £20million for the player, with some of the fee being made up by bonuses.
"I think that they are very close (to a deal)," he said.
"We are also so sad because Mario was an important player for us.
"He is a fantastic player but I think for him this could an important chance to go back to Italy and play for another top club like Milan.
"I hope he can continue to improve because he can become one of the world's best players."
Providing there are no unforeseen hitches, Balotelli will join Milan ahead of Thursday's transfer deadline, thus ending a remarkable two-and-a-half-year stay with the Blues during which time the forward has attracted almost as many headlines for off-the-field incidents as success on it.