The 22-year-old is poised to undergo a medical on Wednesday ahead of penning a four-and-a-half year deal, and his soon-to-be-former boss has praised the outgoing striker
The two clubs reached an agreement over a €23.4 million [£20m] deal on Tuesday, with the Rossoneri revealing via their Twitter account that "Balotelli's medicals will take place [on Wednesday] at Busto Arsizio and Milanello", while his first training session with the team will take place on Thursday.
As Goal.com exclusively revealed on Monday afternoon, negotiations between the two clubs had accelerated, leaving Balotelli poised to undergo a medical in Milan ahead of the proposed transfer, and Mancini has confirmed that the switch is set to be completed.
"They are very close and we are also so sad because Mario was an important player for us," Mancini told reporters.
"With Mario we won the Premier League, the FA Cup, the Charity Shield. He's a fantastic player, but for him, this could be an important chance to come back to Italy and play for a top club like Milan and I hope he can continue to improve because he can become one of the best players in the world.
"It's difficult for me because I lost one striker and that could be important in the next 14 games.
"It is important for Mario to go back to Italy. It could be a good chance for him to stay with his family and to play for Milan. He can improve and I am happy for him. He can be one of the best players in the world."
Balotelli's stock fell after a training ground bust-up with Mancini and, although he was subsequently dropped from the first-team, he was then given a reprieve by the 48-year-old, who took time to hail the 22-year-old's character in light of the imminent departure.
Mancini said Balotelli "is in the history of this club" with his goals during City's title-winning campaign last season, along with his assist for Sergio Aguero's all-important winner against QPR on the final day of the season.
Mancini continued: "For me Mario was like one of my children. You can be upset with him sometimes but after he is a lovely guy.
"We talk, the club told me about the request from Milan. I spoke with Mario. I think that Mario wanted this because for him after three years in England, to go to Italy will be good for him.
"I invested a lot of time in good players - Mario maybe more, but he is in the history of this club because he won three trophies in two years and he scored important goals last year against United away. He did well, very well.
"I speak everyday with Mario, we speak about his situation. I think it is a good opportunity with him. All the players will miss him, all the players when Mario left the hotel were really sad, because Mario is a good guy, he's been with us for two years."