The Serie A club have exercised an option to secure the 23-year-old's services until 2025.
Blues academy graduate Tomori has impressed on loan at San Siro during a spell in which he made 22 appearances in all competitions.
💬 "I thank the Club for believing in me" 🔴⚫— AC Milan (@acmilan) June 17, 2021
@fikayotomori_'s joy on our official Twitch channel 👇
💬 "Ringrazio il Club per aver creduto in me" 🔴⚫
Sul nostro canale ufficiale Twitch, tutta la gioia di Tomori 👇#NewPlayerUnlocked #SempreMilan @Twitch_Italy
Milan is reported to have paid £25million to seal the deal, which could rise to £30m depending on performance factors.
"Chelsea is grateful to Fikayo for his contributions at the club, from youth level to men’s first-team squad, and wishes him the very best in his future career," read a statement from the Premier League side.
Tomori, who had 17 top-flight outings during his time at Stamford Bridge, has one England cap to his name.