The 17-year-old forward is one of Europe's most highly-coveted youngsters, and Arsenal are believed to have had a bid rejected for the starlet earlier last month after he completed a trial at the club.
Roberto Mancini was also thought to be keen on the powerful striker, who has already made a handful of first-team appearances for French club Caen.
But now Milan have moved into pole position to secure Niang's signature, after the 17-year-old flew to Italy for talks and a tour around the Italian club.
City are also hopeful of persuading Niang to join them with a similar offer for a trial and talks. Caen are resigned to losing their star asset this summer, and club president Jean-Francois Fortin confirmed there are a number of interested parties.
"Arsenal made me a proposition, but other clubs are interested - two in England, and one in Italy," Fortin told L'Equipe.
"There will be an issue here for a fortnight before the matter is resolved."
Arsenal have been particularly active in the transfer market this summer, but have opted to bring in established internationals like Lukas Podolski and Olivier Giroud.
But Gunners boss Arsene Wenger has a fine reputation for bringing through top young talent, and the Arsenal manager will hope his track record will be enough to convince Niang to reconsider and join the north London club.