The 19-year-old France Under-21 international has failed to make an impact at the Serie A club, scoring only goal in 33 games since his move from Caen in August 2012.
Niang has claimed he rejected overtures from Marseille and Lyon in preference of a move to Ligue 1 strugglers Montpellier.
In quotes reported by L'Equipe: "I'm very happy about joining Montpellier. I also had some offers from Marseille and Lyon, but I want to help Montpellier."
Niang remains determined to make a name for himself at Milan when he returns from his loan spell.
"I don't have any regrets about joining the Rossoneri," he added. "My ambition is to return to Milan as an even better player."
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