West Ham have signed goalkeeper Darren Randolph following his exit from Birmingham City.
The Serie A club's vice-president Adriano Galliani hinted at a move for Torres this week, and the clubs have now begun discussions over a potential deal.
Sky Sports' Spanish football expert Guillem Balague believes agreement on a fee is close, although he says the deal is not done yet.
Chelsea manager Jose Mourinho said at the weekend Torres remains in his plans, but a player who cost the club £50m did not even make the squad for Saturday's win against Leicester.
If a move goes through, Torres could be joined in Milan by current Chelsea team-mate Marco van Ginkel.
The Dutch midfielder has recovered from a serious knee injury suffered early in his first season in England, and Milan want to take him on loan - although Sky Italia reports that van Ginkel prefers to stay at Chelsea.
Galliani said: "We are confident. We have made our proposal to Chelsea and are now waiting on an answer. We hope we can get him."
Sky Bet suspended betting on Torres' next club on Thursday afternoon after taking bets on the striker joining AC Milan at as short as 1/4.