Inter, reduced to 10 men early in the second half following Cristian Chivu's dismissal, would have gone top with a win as they bid for a sixth straight Serie A title but instead now trail their rivals by five points with just seven games left.
Inter coach Leonardo bossed Milan to third spot last term but his attacking tactics in his first game against his ex-side were ruthlessly exposed by Massimiliano Allegri's men, despite the suspension of former Inter striker Zlatan Ibrahimovic.
Brazil forward Pato struck the opener after just 44 seconds when Inter's shaky defence was ripped apart on the first of several occasions during the game and he grabbed a fortunate second on 62 minutes after Chivu had already been sent off.
Substitute Antonio Cassano earned and netted a late penalty, only to be sent off for a second booking minutes later, but little could steal the gloss from Milan's triumph after they also beat last season's treble winners 1-0 in November.
They were not helped by Leonardo's 4-2-3-1 formation which was being swamped by Milan in midfield, especially when Inter full-backs Maicon and Javier Zanetti pushed too far forward.
Inter's system also meant in-form striker Samuel Eto'o was shunted out to the left wing and he barely had a touch before missing a superb chance just before the break at the far post.
Thiago Silva's resultant free kick was well-saved but Julio Cesar could do nothing when Ignazio Abate's mis-hit shot fell for Pato to head home the second goal.
