The Portuguese winger has emerged as a top target for the Blues, but Milan are unwilling to sell for less than his €150m release clause and have already begun talks to extend his contract at San Siro beyond 2024.
The Rossoneri hope Chelsea will eventually give up on Leao, especially after hearing that France international Nkunku has completed his medical with the Premier League giants.
German paper Bild reports that the 24-year-old had medical examinations with the Blues in September and the Premier League giants have already prepared a long-term contract for the promising winger.
Transfer expert Fabrizio Romano has confirmed the report.
Chelsea are expected to pay the player’s €60m clause or finalise the deal for a similar fee but a different structure.
Nkunku can play as a left winger or as a support striker and, on paper, he would cover the same position as Leao at Chelsea, so the Blues may not want to invest money in two players with similar features.
Manchester City remain interested in Leao, who, however, seems willing to extend his contract with the Serie A champions.