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That's according to claims made by Italian outlet Corierre Dello Sport.
Walcott, 28, is under contract to June 2019 and has been with the Gunners for over a decade.
Arsene Wenger's tactical shift in formation has meant Walcott has played a bit-part role this season.
He has made just four substitute appearances in the Premier League.
But Walcott has still managed to contribute four goals and five assists in 13 cup games.
Milan are struggling with FIFA Fair Play restrictions but are desperate for pace out wide.
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So Walcott could fit the bill on a loan deal.
With the 2018 World Cup in Russia looming, Walcott is concerned that lack of game time will seriously harm his chances of making the England squad.
Southampton are the most likely candidates for a return to the club where he grew up.
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West Ham United, Everton and Newcastle United are also options to take Walcott on loan for the rest of the season.
AC Milan are struggling badly in Serie A this season. The Rossoneri currently sit in 11th place.
Walcott's current club Arsenal drew 2-2 with Chelsea yesterday, leaving them with a mountain to climb to finish in the top four.