Füllkrug joined Milan from West Ham United in January after failing to make an impact in east London, scoring just three goals in 29 appearances across 18 months.
The Serie A side took him in as a late addition after other targets fell through, but his form in Italy has been little better — one goal in 16 appearances, starting only three times, as Massimiliano Allegri preferred Rafael Leão in a false nine role.
Sky Sport Germany reporter Florian Plettenberg confirmed that West Ham are convinced Milan will not exercise the purchase option, meaning Füllkrug returns to London this summer.
His contract at the London Stadium remains valid regardless of the club's top-flight status — West Ham are currently 17th — though his salary would be halved in the event of relegation.
Wolfsburg had previously expressed interest in signing the 33-year-old before his move to West Ham two years ago, and have returned to that position ahead of the summer. A return to the Bundesliga would be a more natural fit for a striker who scored 16 goals in the league for Borussia Dortmund in his final season before moving to England.
With the World Cup in North America approaching this summer, Füllkrug's priority will be to find regular football to push his case for Germany selection under Julian Nagelsmann.