According to La Gazzetta dello Sport, Milan vice-president Adriano Galliani and director Umberto Gandini made significant progress in negotiations with Torres's representatives Margarita Garay, Gabriele Giuffrida and Antonio Sanz at lunch yesterday.
The deal being negotiated appears to be a two-year loan deal with the option for a third year if an extension is agreed at the time.
With Torres's contract at Stamford Bridge expiring in 2016, he would be a free agent after his two-year loan ended and Milan would get the first chance to snap him up.
Milan are now close to getting Torres to agree to a large pay cut to just £3.2 million per year from his estimated £5.6 million at Chelsea.
Torres is hoping to get a payment from Chelsea when he leaves to make up for the salary cut and the bonuses that he will be missing out on should the Blues win silverware this season.
According to La Gazzetta, Milan have told Chelsea that they expect an answer by 11am. Their impatience may have something to do with reports that Roma are trying to intervene.
It is being reported that Torres's entourage met with Roma sporting director Walter Sabatini yesterday and the Giallorossi could still play their trump card of offering Mattia Destro in exchange.