The Sun says Blues chief executive Peter Kenyon flew out to meet Milan vice-president Adriano Galliani in Sardinia yesterday to discuss Sheva's return.
The Ukraine striker, 31, has been a flop since his £30.8million move to Stamford Bridge two years ago.
He has hit just nine League goals, while being paid £130,000 a week as a sub.
He is not in new boss Phil Scolari's plans and even owner Roman Abramovich agrees it is time to cut his losses.
Galliani said: "Shevchenko has remained in our hearts."