La Stampa says new Inter coach Leonardo was keen to work again with Ronaldinho and asked Moratti about moving for his countryman.
Moratti was excited by the idea and had the money available to meet Milan's €8 million asking price.
But Milan chiefs moved quickly to block the deal.
Roberto de Assis, Ronie's agent and brother, had already been approached by Inter and was keen to broker terms - before getting a call from Milan.
"Ronaldinho can leave," he was told, "but not for another Italian club."
Leonardo was disappointed by the news, but Inter have been happy to have it slip out in the last 24 hours.
While the Rossoneri will be furious by Leonardo's bold approach, Inter know their fans will absolutely be loving the way their new coach is now challenging their city rivals.