According to La Gazetta dello Sport, Milan want to bolster their defensive options as Cristian Zapata waves goodbye to the Rosseneri.
It has been reported that Milan CEO Ivan Gazidis, formerly of Arsenal, is a fan of Mustafi.
Despite playing regularly for Arsenal this season, however, the German's frequent errors have prompted the club to look for suitors.
However, any permanent move for Mustafi would cost around £20m.
The price may be considered too steep for a club struggling to qualify for the Champions League, so a loan deal now appears the best option.
As well as Zapata departing, Mattia Caldara's Milan future is uncertain.
If Caldara were to also leave, the Serie A giants' need for defenders would escalate drastically.
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