AC Milan are in talks to re-sign Real Madrid midfielder Brahim Diaz for the new season.

Calciomercato.com says the two clubs are nearing an agreement over a new loan arrangement.

Real Madrid coach Carlo Ancelotti has reassured Milan director Paolo Maldini during a recent phone conversation about allowing Diaz to make the move.

The two clubs have agreed on the transfer formula which will be a loan with option to buy and a buy-back in favour of Real Madrid.

Milan want the permanent option set at €20m, with Real Madrid insisting on a price of €25m.