Last week, Milan coach Massimiliano Allegri said the 2018 Ballon d'Or winner would head to the San Siro from Real Madrid after the Club World Cup.

Modric, who turns 40 in September, joined Madrid from Tottenham in 2012 and had been linked with a move to Italy since early June, after announcing he would leave the Spanish giants at the end of his contract.

"AC Milan are delighted to announce Luka Modric has signed a contract with the club until 30 June 2026 with an option for a one-year extension until 30 June 2027," the 19-time Serie A winners said.

Modric was in Milan earlier on Monday to undergo medical tests but according to Italian media will only start training with his team-mates in August.

"I'm very happy to be here to start a new chapter in my career," Modric said in a video on the club's social media platforms.

"A big hug to everyone," he added.

Allegri is back at the helm at Milan having led them to the Serie A title in 2011 during his first spell in charge between 2010 and 2014.

Their first game of the new season is in the Italian Cup on August 17.