Dalot, 21, is out of favour at Old Trafford and will be allowed to leave the club for the right price.
But Milan’s offer of a loan with an option to buy has not convinced the Red Devils who want a permanent sale.
Milan are now considering whether to make a new proposal to United or target another player.
The Rossoneri remain in the hunt for a new centre-back, with Wesley Fofana still on their radar.
If Milan are able to sell Lucas Paqueta to Lyon, they may be in a position to make a bid for Fofana.
Milan signing Hauge
One player who is certain to join Milan is Norwegian talent Jens Petter Hauge.
And Milan have moved quickly to secure the left winger, who has several other important clubs monitoring him.
— Antonio Vitiello (@AntoVitiello) September 28, 2020
Milan will pay around €5m for Hauge, who is reportedly excited to join the famous Italian club.
20-year-old Hauge is expected to undergo a medical later this week.