Gattuso is infamous for his time at the base of Milan's midfield, with Andrea Pirlo the good cop to the snarling bad of Gattuso, and has been managing Milan's youth team.
"A club statement released on their official Twitter account read: "#ACMilan announce to have parted ways with @VMontella.
Milan, who spent over €200 million in the summer, have now placed their former midfielder Gennaro Gattuso in charge of the first team as they try to rescue their season.
He will appear at a news conference at their Milanello training ground on Tuesday.
Vincenzo Montella admitted leaving Milan was "very painful" but he said he would continue to support the club, while admitting he "failed" in his assignment.
"I hope Rino takes Milan back where they belong".
It is now in seventh place in the Serie A standings and is coming off a draw against Torino on Sunday.
Milan lanuguish in seventh place, 11 points away from the fourth position which would guarantee a place in the Champions League next season.
Instead AC Milan went for Nikola Kalinic who started his adevnture well with the Rossoneri scoring twice against Udinese but since then he has been very poor and the Milan faithful have grown tired of the Croatian striker as exemplified earlier today when he was brought off against Torino and was thoroughly booed and jeered.
"That's fantasy football - Milan will never be banned from Europe", Mirabelli told Mediaset.