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It was reported in Italy that discussions between the Portugal international and the club on a new deal had broken down.
Leao's deal at San Siro is due to expire in 2024 and it was claimed the player's entourage wanted to significantly reduce his release clause.
Milan denied that any breakdown has occurred, though, and insist discussions will continue.
"With regard to the article published today by the newspaper La Gazzetta dello Sport titled: 'Leao Milan total break', Milan would like to clarify that the negotiation with Rafael Leao has not suffered any interruption," a club statement read.
"The journalistic narrative of an alleged frost between the parties is not only totally unfounded but also harmful to the club and its player.
"AC Milan continues, in fact, the dialogue with Leao and his entourage in a serene and professional atmosphere."
Several clubs have been attributed with an interest in Leao, including Premier League trio Manchester City, Arsenal and Chelsea.