A passerby spotted the suspect package while walking through the underground at the city's central station, Milano Centrale, and immediately raised the alarm, La Stampa reported.
The station was locked down and evacuated at 4:45pm and several other underground stations in the centre of Milan were also cleared out and closed as a precautionary measure.
“The package was destroyed in a controlled explosion and was harmless, but it was probably left there deliberately to create panic,” said Italy's Interior Minister, Angelino Alfano.
The bomb-scare caused chaos for rush-hour travellers as several stops were shut down for an hour and a half.
The section of the M2 underground line between Porta Garibaldi and Cascina Gobba was closed, as was a section of M3 line between the stops of Repubblica and Sondrio.
The northeastern Italian city of Ventimiglia also witnessed an unfounded bomb-scare on Monday morning when police received a tip-off an explosive device had been left at the city's fruit and vegetable market, which was evacuated and searched by bomb disposal experts.
Following recent attacks in Germany and France, Italy's terror alert remains at 'level two', the highest level possible without a direct attack.