The Sun says the Premier League champs are expected to announce they have sold the hothead striker for around £17million today.
It is understood Milan could include former Spurs midfielder Kevin-Prince Boateng on top of that fee.
Italian ace Balotelli threw a leaving party at his house for close pals last night.
He told them he was off to the San Siro and gave away mementos from his controversial stay at the Etihad.
City had been holding out for a much bigger return on the player they paid Inter £22m for in August 2010.
But the relationship between Balotelli and City boss Roberto Mancini seems unsustainable.