Balotelli has been strongly linked with a move to Milan over the course of the January transfer window, with the Italian club already announcing a deal has been done for the 22-year-old.
And Mancini said after seeing his side draw 0-0 against QPR that the player looks destined to leave the Barclays Premier League champions.
"I think that they are very close (to a deal)," he said.
"We are also so sad because Mario was an important player for us.
Balotelli was set to be involved in City's squad to face QPR on Wednesday but left the team hotel ahead of his move to Milan.
The Serie A giants are believed to be paying around £20million for the Italian forward, with some of the fee being made up by bonuses.
Balotelli will now almost certainly pen a four-and-a-half-year deal with Milan on Wednesday and Mancini, who also managed him at Inter Milan, is clearly sad to see him leave.
"This is for Mario because we love Mario and he deserves to have this chance."
Mancini joked in the press conference that while he would miss Balotelli, the media would even more.
On a more serious note, though, the Italian accepts his countryman's departure could adversely affect City's title hopes.
This evening's draw leaves the reigning champions four points adrift of leaders Manchester United, who could extend that further against Southampton on Wednesday.
"It is difficult because I lost one important striker and that could be important in the next 14 games," Mancini said.
Mancini believes Balotelli has done "very well" in his two and a half years with City, although concedes this season has proved more difficult.
He was also quick to deny suggestions the departure was related to difficulties in dealing with the forward.
"No, no, no, not for me," he said. "For me, Mario was like another of my children.
"Mario is this but you can be upset with him sometimes.
"The club told me they had this from Milan. I spoke with Mario and I think he wanted this.
The Italy international could go on to become one of the best players in the world.