The Italy international picked up a groin injury ahead of his side's 4-0 Serie A defeat to Napoli at the start of October and has been out of action since.
Milan were initially hopeful Balotelli would only miss the match with Napoli, but the 25-year-old remains unavailable for now.
"Balotelli’s fitness has been a bit up and down," Mihajlovic said at a news conference.
"We want to try and resolve his injury as soon as possible. He is doing everything possible, but it's not easy to deal with a groin injury.
"It's revealed itself to be more serious than first thought."
Milan have been struggling to find their best form this term, yet Mihajlovic is confident they will bounce back and return to winning ways sooner rather than later.
"We're not a world-class team at the moment, but we're trying to achieve that," he said.
"It will take time and we need the right additions, players that bring you quality and a winning mentality. Milan recently lost the core of its team and we need to rebuild.
"If we look around, other big teams that have lost key players have had problems too. It takes time, but I don't know how much time is needed. Milan have quality.
"We can do better, this is there for all to see, and I am the first to be responsible as the coach. But I repeat, I am sure we can come out of it."