In the summer of 2003, Pancaro transferred to A.C. Milan in exchange for Demetrio Albertini, where he played for two seasons. His consistency and work-rate made him an important part of Milan's squad, as he won his second Serie A title, as well as an Italian Supercup, also reaching the final of the 2004–05 UEFA Champions League, notably scoring a goal in an away victory over Brescia in 2003. In 2004, he signed a one-year extension for the club.