The Serie A giants are reported to have agreed a €35m deal with Flamengo - the club Paqueta joined as a ten-year-old - in what would be the most expensive signing of a Brazilian player by an Italian club.
The 21-year-old completed his medical in Rio on Wednesday and should arrive in Milan in the January transfer window.
According to reports in Italian media, two-time capped Brazil star Paqueta - who can play both in midfield and as a striker - has agreed a five-year deal worth 1.5 million euro per season.
"We have a basic agreement with Flamengo, but the market doesn't re-open until January so there's still a little bit to go before it's official," club sporting director Leonardo told journalists after receiving the Liedholm Award.
"Now we can only think of the league and the Europa League, not the transfer market.
"At the moment he's a Flamengo player, he still has some Brazilian league matches to play. We have to wait for 3 January," added Leonardo.
Leonardo confirmed that the club have also "thought about" signing Ibrahimovic, who joined LA Galaxy this season and has a contract through the 2019 season with the Major League Soccer side.
Ibrahimovic played for AC Milan from 2010 to 2012, winning a Serie A title with the club, before moving to Paris Saint-Germain and then Manchester United.
Leonardo, a midfielder who also played for both PSG and Milan, was director of football at the Parisian club when the Swedish striker joined.
"It's normal that there's a personal connection with him. When we first arrived we thought about it, even at the age of 37 he can drive a team," he said
"Right now the transfer window is closed, we have to do things calmly and not forget that there are some Financial Fair Play stakes. We want to build a competitive team."