According to the French publication L'Equipe, the Portuguese international is close to joining the San Siro outfit. He will sign a four-year deal with the Italian club and his sale will cost Milan around €40m (£35.7m, $47m).
Xabi Alonso left Bayern after the end of the last season as he announced his retirement from professional football. This would have come as a boost for Sanches to get more playing time next season. However, Corentin Tolisso arrival from Lyon will make it difficult for the teenager to fight for a place in the squad.
Bayern CEO Karl-Heinz Rummenigge has already confirmed a loan move or a permanent transfer could be a possibility for Sanches as the player is unlikely to get regular playing time under Carlo Ancelotti next season.
The 19-year-old was one of the hottest properties at the end of the 2015/16 season as he was constantly linked with hosts of clubs across Europe. He was at Benfica and decided to leave the Portuguese outfit for the Allianz Arena in May 2016.
In his debut season in Germany, Sanches has struggled to impress for Bayern. He made only six starts in the Bundesliga, taking his overall starts to nine matches across all competitions during the last term.
Lack of playing time has seen him express his desire to leave his current employers, with United believed to be interested in signing him. The Red Devils came close to landing him last summer as the delay in Jose Mourinho's appointment saw them miss out on Sanches.
Sanches' decision to join Milan over United will be the second blow for the Red Devils in their chase of the former Benfica man. Mourinho will be left frustrated in his efforts to complete the third signing of the summer at Old Trafford.
United have added Victor Lindelof and Romelu Lukaku to their squad. Mourinho has publicly revealed his desire to add a midfielder and an attacking player to his squad. They were hoping to make Sanches their third summer signing and will now be left disappointed as Sanches is edging closer towards sealing a move to Milan.