Allegri had been tipped to leave the club after a relatively disappointing season with the Rossoneri, who scraped third place in Serie A.
But, following a dinner between Berlusconi, Allegri and club vice-president Adriano Galliani – a supporter of Allegri’s – it seems the decision has been made to keep the former Cagliari boss.
“With Galliani and Allegri we had a frank and cordial discussion in which we revisited and analysed the past season, so there was a clarification on certain things,” said Berlusconi.
“We reached an agreement on the rights and duties of the club towards the coach and the coach towards the club.
“We also talked about the type of football that Milan must play and the squad for next season, setting out guidelines for the transfer window.
“The rapport with the coach, which has never been in doubt, continues with faith and in absolute reciprocal respect.”
Former Milan midfielder Clarence Seedorf had been widely rumoured to be Berlusconi’s preferred candidate, but fans protested the Dutchman’s appointment as he has no coaching experience and is still playing at Botafogo in Brazil.