The 30-year-old has signed a three-year contract with the Italian club, with AC Milan reportedly paying 10 million euros for the France international.
Rabiot was put up for sale by Marseille along with English winger Jonathan Rowe due to "unacceptable behaviour" after the team's loss to Stade Rennais in the Ligue 1 league.
Rowe has since joined Serie A side Bologna and may face Rabiot in AC Milan's next match against Bologna on September 14.
Rabiot will be reunited with Massimiliano Allegri, his former coach at Juventus, where he played for three seasons before joining Marseille last year.
During his time at Marseille, the team finished second in the Ligue 1 league behind Paris St Germain, where Rabiot started his career.
Rabiot is currently part of the France squad for the upcoming World Cup qualifiers and has made 53 appearances for the national team. His last goals for France were scored in a 3-1 win against Italy at the San Siro in November.