The former Genoa starlet had joined the Rossoneri on a temporary deal over the summer.
“AC Milan announces that the early termination of Pietro Pellegri’s loan deal has been agreed with AS Monaco,” a club statement read.
“The Club would like to thank Pietro for his commitment and wishes him the very best in his future career.”
Pellegri has been struggling with injuries during his six-month spell at Milan, playing just six matches.
The Rossoneri had an option to buy for €6m at the end of the season but tried to negotiate a lower fee in January.
The plan was to sign Pellegri permanently and loan him out to Torino until the end of the season, but talks with Monaco collapsed, so the Granata will get the striker on loan from the French club.
They will also have an option to buy for circa €6m.
Milan have signed 18-year-old Marko Lazetic, who will be their third striker for the second part of the campaign.
— AC Milan (@acmilan) January 27, 2022