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Di Francesco was reportedly a contender to replace Sinisa Mihajlovic at the San Siro before Cristian Brocchi was appointed less than a week ago.
With Brocchi only under contract until the end of the season, Di Francesco continues to linked with Milan, having established Sassuolo in Serie A.
However, the 46-year-old insisted he is happy at the Mapei Stadium with a new deal imminent.
"I have a contract with Sassuolo," Di Francesco, who first coached the club in 2012, told Rai Sport.
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"I've been very happy at the club over the past few years. I still have a year left on my contract.
"During the week I'll be meeting with club executives to sign an extension."
Sassuolo went down 3-1 at Fiorentina on Sunday, their second consecutive defeat.
However, Di Francesco and Co. are flying high this season, eighth in the table and only four points behind Milan.