The Colombian midfielder was heavily linked with a move to Stamford Bridge last January, before Jose Mourinho opted to resign Nemanja Matic from Benfica.
Guarin was previously mentioned as a player to make way at the San Siro to raise funds, and a last minute swap deal with Juventus that involved Mirko Vucinic collapsed late in the transfer window.
But he has since gone on to star for Walter Mazzarri’s side in the second half of the season, and is set to be rewarded with a new contract.
The 27-year-old had also previously been linked with Manchester United, but La Gazetto dello Sport reckons he is set to sign a one year extension at the San Siro.
Guarin remains in the plans of Mazzarri, who is set to be given funds to rebuild the Italian giants in the summer after a season of struggle in Serie A.
They are backed by Indonesian businessman Erick Thohir, who is set to offer Guarin a contract with a salary reported to be worth more than €3million a year.