Halilovic, 24, joined Milan in 2018 but has since been loaned out to Standard Liege and Heerenveen.
The former Barcelona player shot to fame with his performances for Dinamo Zagreb as a teenager.
But he has struggled to follow up on his early potential with failed spells at Hamburg and Milan.
Benfica have a ‘strong interest’ in Halilovic and talks are in progress over a deal for him.
Last winter, Halilovic was close to a La Liga move with Real Betis, Levante or Espanyol.
However, he decided to stay in the Netherlands with Heerenveen for the remainder of the season.
Now a new adventure could begin for the Croatian international with Benfica, led again by Jorge Jesus.