The 23-year-old has signed a five-year contract, becoming Eddie Howe’s first signing of the summer as his side prepares for Champions League football.
The reported £55m fee would make him the most expensive Italian footballer of all time.
Tonali helped Milan win Serie A in 2021-22 and was part of the side which reached last season’s Champions League semi-finals.
He was also a member of Italy’s squad at the Under-21 European Championships.
Tonali told the club website: “I want to repay the trust on the pitch, giving it my all, as I always have. I’m really excited about playing at St. James’ Park, I can’t wait to feel the warmth of the fans.”
Newcastle head coach Howe said of Tonali: “He is an exceptional talent and has the mentality, physicality and technical attributes to be a great fit for us.
“At 23, Sandro already has important experience as a key player in one of Europe’s top leagues and in the Champions League, as well as playing for his country.
“But he also has the opportunity and potential to grow and evolve with us, and I’m excited to add him to our squad as we approach the exciting season ahead.”
Tonali came through the ranks at Brescia and made his professional debut for them in Serie B at 17.
Brescia were promoted to Serie A in 2018-19 and, though the club was relegated the following season, Tonali made his Italy debut during that campaign when he came on as a substitute against Liechtenstein in October 2019.
He joined AC Milan on loan in the summer of 2020 and, after making the move permanent the following year, scored five goals in 36 top-flight appearances as the club won the Italian title in 2022.
Tonali scored twice in 34 Serie A outings as the San Siro side finished fourth last season, while he made 12 appearances in the Champions League before Milan were knocked out by rivals Inter in the semi-finals.
