Milan president Silvio Berlusconi has confirmed coach Leonardo will leave the club at the end of the season.
Leonardo's tenure comes to an abrupt end after just one season in charge during which he has frequently fallen out with the club's owner.
"Yes, he is going," Berlusconi is quoted as saying by Corriere dello Sport.
"The new manager? The discussions are ongoing. Leonardo was too hard-headed, the team has played badly."
Berlusconi then praised Inter after having seen them reach the Champions League final.
"Look what I have to do now," he said. "But, I always support Italian teams when they play in Europe. Inter were good, and it's hard to say this when you are a Milan man."
Milan have reportedly lined up Mauro Tassotti and Filippo Galli as Leonardo's replacements.
Leonardo has been linked with the Brazil job after the World Cup., but Brazilian club Flamengo revealed earlier this week that Leonardo could join the club in a non-managerial role following the dismissal of coach Andrade.
President Patricia Amorim said: "The first person I thought of was Zico. I think he is everything that is right for this club. We talked about it, but at this moment he is not ready to return, although he knows that for him the doors are always open. What is another very interesting name is Leonardo. Not to coach - I'd have him as director general. He has the experience and ability to fulfil this role. Let's see what happens."