Suso, 26, joined the Rossoneri from Liverpool in 2015 and has been a prominent member of the first-team squad over the past three-and-a-half years.
The winger made a total of 128 appearances over the past three seasons, scoring 23 goals during that time.
However, Suso had become surplus to requirements in Milan this season with the emergence of fellow Spaniard Samu Castillejo as an option on the right flank.
Milan were said to have valued Suso at €40 million in pre-season, but his underwhelming form this term is seemingly reflected by the reported €25m (£21m/$27m) purchase option for Sevilla.
The move sees Suso reunited with Julen Lopetegui, the coach who handed the former Cadiz youngster his first Spain cap and also worked with him in La Roja's youth setup.
After starting his youth development at hometown club Cadiz, Suso joined Liverpool's youth academy in 2010 before making his senior debut for the Reds two years later in the Europa League.
He went on to make 20 further appearances for Liverpool during his time in England before departing on a loan move to Almeria and, ultimately, a permanent move to AC Milan.
The winger did go on one more loan spell after joining Milan, moving temporarily to Genoa, where he played 19 times, scoring six goals and providing one assist.
Suso will now be expected to compete with Nolito, Lucas Ocampos, Rony Lopes and Munir El Haddadi for a spot in Sevilla's starting XI.
Sevilla are set to visit Mirandes on Wednesday as the club continues on in the Copa del Rey.