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Kaka responds to chanting fans by dangling an AC Milan jersey from the window of his residence in Italy on Monday night. ((Luca Bruno/Associated Press))

AC Milan playmaker Kaka has decided to stay with the Italian club, ending talks of a record-breaking transfer to Manchester City.

Italian Prime Minister and AC Milan president Silvio Berlusconi said late Monday that Kaka had decided to reject City's offer, which would have made him the best-paid player in soccer.

"Kaka is staying with Milan," Berlusconi told a TV show late Monday. "For Kaka, money isn't everything.... Kaka is and remains with Milan."

Shortly after Berlusconi's comments, City issued a statement confirming it had ended negotiations with the Italian team over the transfer.

"Following a meeting in Milan today, the club felt that it was unlikely that the two parties could reach common ground for an agreement," City said. "The discussions reached only a preliminary stage and the player was not involved at any time. No commercial terms were framed."

City's bid for the 26-year-old Brazilian was said to be $181.8 million, which would have eclipsed the $82 million that Real Madrid paid for Zinedine Zidane in 2001.

Upon hearing the news, fans holding vigil outside Kaka's downtown home celebrated as if the Brazilian had scored a goal.

They began chanting, and Kaka poked his head out a window and made a celebratory gesture himself, applauded and threw a Milan jersey down toward the crowd.

Berlusconi added in a phone interview with the "Processo di Biscardi" show that he had tried to persuade the player to stay.

"It was my intervention, but also his," Berlusconi said. "When I heard he preferred to stay, that he hadn't thought about losing a chance for a higher salary and that he put the values of the club, friendship and fans' affection above all else, I said, 'Come on' and we hugged."

'Signed with the heart'

The comments brought to a close a full day of negotiations between Kaka's father and chief adviser, Bosco Leite, and the two clubs.

"He has taken himself off the market with this decision to remain tied to the contract he has with Milan," Berlusconi added in another interview with Sky Italia TV. "A contract signed on a piece of paper but, from now on, we can pretty much call it signed with sentiment, signed with the heart.

"Kaka is a great champion and a great man. He turned down the offers from Manchester and preferred Milan, his teammates and his fans.

"He said no because money isn't everything in life. Money is important, but there are also other things that are more important."

Earlier, a group of about 500 fans protested outside Milan's downtown offices, chanting "Don't sell Kaka."

A few flares were lit, but no problems were reported.

'Heart has prevailed in the matter'

Afterward, about 50 fans moved toward Kaka's home and chanted, "Stay with us, Ricardo," to which Kaka replied by approaching a window with a Milan jersey in hand and beating his hand three times on his heart, sending the fans into delirium, the ANSA news agency and Gazzetta dello Sport website reported.

Eventually, a worker at Kaka's house went outside and asked the fans to quiet down because they were disturbing Kaka's child.

The fans said they would leave if they could see their idol once more. Kaka obliged and approached his window again and the fans left.

"Heart has prevailed in the matter," Milan vice-president Adriano Galliani told Milan Channel. "The fans should thank president Berlusconi again for his economic input. It was a strong temptation, with such astronomical and world record figures."

There has been speculation that Kaka's camp will ask for a revision of his contract with Milan if he stays, although he is already the highest-paid player for the Rossoneri at $14.8 million per season, and Milan does not appear inclined to accept such a request.

Milan's other Brazilian stars earn much less — Ronaldinho is paid $6.6 million annually — and Milan fears that if it restructures Kaka's contract, other players will want to follow suit.

Kaka is under contract with Milan through 2013.