It emerged in July that Los Che had agreed to hand over an initial 700,000 euros for the Rossoneri defender, with a view to a permanent transfer to Mestalla next summer.
The deal was expected to be formally announced by Sunday but the Spain Under-23 international, who spent last season on loan at former club Espanyol, is now on his way back to San Siro.
"AC Milan announce that, due to a mild inflammation of the pelvic area, the player Didac Vila will return to Milan and rejoin the first team," a statement on the Italian outfit's official website read.
The collapse of the transfer is a major blow for Valencia, as the club had identified Vila as the perfect replacement for Jordi Alba, who completed a move to Barcelona in July.
The 23-year-old Vila arrived at Milan during the Jan. 2011 transfer window but made just one appearance in Serie A before being sent back to Catalunya on a temporary basis.
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