AC Milan and city rivals Inter have rejected a plan to renovate their San Siro ground but revived proposals to build a new joint stadium in the same area, mayor Giuseppe Sala said on Friday.
The move is the latest twist in a saga involving the two Serie A clubs and local authorities for the past five years.
"After an in-depth analysis the clubs concluded that the [San Siro] stadium cannot be revamped in an affordable way ... they don't think it is feasible," Sala told reporters after a closed-door meeting with club representatives.
"They have put forward the idea of going back to a new stadium in the San Siro area", Sala said.
Inter and Milan see a new modern arena as a way to boost revenues, which lag behind those of their European peers.
The idea of restructuring the century-old San Siro and keeping it as Milan and Inter's home was supported earlier this year by Sala after the teams signalled that they wanted to build separate new stadiums on the outskirts of the city.
Earlier, the clubs had been in talks with the city to build a new joint arena to replace the old San Siro, but the plan stalled amid political resistance and heritage rules that protected the stadium, which has a nearly 80,000 capacity.
Milan and Serie A champions Inter are now both controlled by U.S. based investment firms, respectively RedBird and Oaktree, after the latter took over Inter from Chinese firm Suning in May.
The clubs are now proposing to buy from the city of Milan the areas surrounding the old stadium and build a modern facility which would become their new joint home ground.
The clubs would become the owners of the old San Siro, which would be repurposed.
Before going ahead, they have asked for an assessment of the economic value of the existing facility and the surrounding areas, clarity on the scope of heritage protection for the venue and set a timeline for a possible deal, the mayor said.
"This a long story and I am sorry about that, but it's not easy to build a stadium in Italy," Sala added.