The former Italy international believes club president Silvio Berlusconi must take steps to revitalise the team as new Inter owner Erick Thohir is preparing to do
The ex-Italy star won two Scudetto crowns and two Champions Leagues in a trohpy-laden 10 years with the Rossoneri, but has seen the club's fortunes take a severe decline since his departure in 2012.
Milan have managed just 17 points from their opening 19 games in Serie A this season and Nesta has urged Berlusconi to sanction significant investment to help the club out of its malaise.
"It was predictable what would happen. There is a generational change taking place at all levels," he told Corriere dello Sport.
"Berlusconi must return full-time, with his passion and expertise. To bring in major players it takes investment, as it did in the past."
Bitter rivals Inter are expected to undergo a heavy transition after Indonesian businessman Erick Thohir completed his takeover of the club and Nesta believes such investment is vital to the future health of Italian football.
He continued: "We are accustomed to the 'made in Italy' notion in Italian football. In England, the arrival of major capital made the Premier League rich and compelling.
"Absolutely [investment is needed]. It is mortifying to see our teams fail to pass the first round of the European Cup."
Turning his attention to the Serie A title race, Nesta believes that, despite the emerging threat of Roma this season, the title is once more Juventus' to lose.
"Juventus will win again this year, as always," said the 37-year-old. "They are too strong. Roma pose a threat; Napoli, Inter, Fiorentina will not give up. But Juventus can only lose this championship."
Finally, Nesta paid tribute to former Italy team-mate Francesco Totti, and backed the Roma star to continue playing for several more years to come.
"He is the greatest champion of Italian football," he added.
"I think he can play at this level until he is 45. He's an exemplary professional."