The player is expected to rejoin the Rossoneri on loan again as he did in the 2020/21 season, but this time there will be an option for Milan to buy the player for €22 million at the end of the season.
As has been reported by the print edition of La Gazzetta dello Sport, the announcement should now be imminent.
Diaz impressed during his loan spell at Milan last season without becoming a key part of the side. He featured 27 times and chipped in with four goals.
The club will be hoping that he won’t need any time to settle into his surroundings during this second loan spell and can hit the ground running.
Diaz is a product of Manchester City’s academy but after failing to break into the first team, he was sold to Real Madrid for €17 million.