Deulofeu had slipped down the pecking order at Everton and was spotted in Milan earlier today.
Everton and Milan officials have been thrashing out a deal for weeks over the former Barcelona player.
— Everton (@Everton) January 23, 2017
And the San Siro club were finally able to announce the signing this afternoon.
Milan had wanted to insert a clause in the deal that would have led to a permanent move in the summer.
Gerard Deulofeu (right) has joined AC Milan on loan from Everton
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But Everton supposedly backed away from that part of the deal as Barcelona still have first-refusal on the player.
Deulofeu, 22, cost Everton £4.3million when arriving from the Nou Camp club in 2015 but has lost his place in the side since Ronald Koeman’s appointment as manager.