A Stevan Jovetic brace, along with goals to Scott Sinclair, Jesus Navas and Kelechi Iheanacho saw the Premier League champions to a comfortable victory at Heinz Field in the International Champions Cup.
City were two goals to the good after just 14 minutes courtesy of goals from Jovetic and Sinclair.
Things got worse for new Milan coach Filippo Inzaghi courtesy of two more quick-fire goals from Navas and Iheanacho before the half-hour mark.
Jovetic opened the scoring after 12 minutes when he finished off a pacy attack by slipping home Navas' through ball at the near post.
Just two minutes later, Sinclair - another of City's peripheral figures last term - reminded Pellegrini of his quality with an expertly-angled finish from inside the area.
Navas got in on the action soon after as City's early onslaught continued with the Spaniard's acrobatic effort finding its way past Milan goalkeeper Michael Agazzi courtesy of a deflection off Andrea Poli.
Amid further hapless Milan defending, 17-year-old Nigerian prospect Iheanacho added a fourth with a poked effort from outside the area.
Muntari salvaged something from the half shortly before the interval but Inzaghi was left with food for thought, having seen his side outplayed.
After being substituted in at half-time, Mario Balotelli made his mark on the contest - tucking away what he thought was Milan's second before being denied by the offside flag.
Jovetic reinstated City's four-goal lead prior to the hour mark, when he combined with Aleksandar Kolarov on the left.
The result made it two defeats from as many games for Milan in the International Champions Cup, while Italy's three clubs involved in the United States-based tournament have registered three defeats and one win from four fixtures.
