The entertaining contest in Massachusetts provided the Serie A side with a real test, but a combination of unimpressive finishing and fine goalkeeping from Odisseas Vlachodimos saw the Rossoneri fall short.
Milan looked excellent at times in the first half and crafted a host of opportunities, but it was unable to find a way past the supreme Vlachodimos, who produced a string of impressive saves.
Marco Giampaolo's men remained the more threatening side after the interval, in spite of Benfica's relative improvement, but a fortuitous Taarabt effort ultimately proved decisive.
The result leaves Milan bottom without a point after two games, while Benfica's ICC campaign comes to a close with a strong chance of it winning the competition, with only Manchester United still able to join it on a maximum nine points.
A dominant Milan first went close in the 16th minute, as Hakan Calhanoglu struck the post from distance and Suso wasted the follow-up chance.
Opportunities started to come thick and fast for Milan, but Vlachodimos put up stern resistance, saving from Samu Castillejo and Fabio Borini in a 10-minute spell.
Krzysztof Piatek then shot just wide from close range in the 43rd minute and Benfica nearly capitalised twice – Gabriel Pires testing Gianluigi Donnarumma from 25 yards, before the goalkeeper also thwarted Rafa at the end of a brilliant move.
Milan resumed its pressure early in the second half, but yet again Vlachodimos was unbeatable – the Greece international tipping over a Castillejo strike after the former Villarreal attacker dazzled the Benfica defence.
The Serie A giant was made to rue its profligacy when Benfica finally opened the scoring 20 minutes from time, Taarabt's 20-yard strike taking a huge deflection on its way past half-time substitute Pepe Reina.
Milan almost forced a penalty shoot-out, but Lucas Biglia's fine free-kick strike crashed against the crossbar and Benfica held on.