At Milan, Sacchi again faced problems of credibility. The press argued that such an inadequate player could never go on to be a successful coach, and that even Berlusconi – who had played football at amateur level – was probably a better player. Sacchi, however, coined a witty term in response: “I never realised that in order to become a jockey you have to have been a horse first.” Sacchi was an instant success at the San Siro, leading Milan to its first Serie A title in nine years in his debut season, following up the league title with a Supercoppa Italiana in 1988.

The first European Cup final in 1989 was against Steaua București, who were beaten resoundingly 4–0. Gullit and Van Basten scored two goals each and Milan lifted the European Cup for the first time in over 20 years. En route to the final, Milan had dispatched Real Madrid 6–1 on aggregate in the semi-final, a result which almost represented the passing of the mantle for best European club. The quarter-final against Werder Bremen was a tight affair; Milan only went through 1–0 on aggregate thanks to a Van Basten penalty. The second round was shrouded in controversy. Donadoni had his life saved only through the quick-thinking of the Red Star Belgrade physio, who broke his jaw to make a passage for oxygen to reach his lungs after he had suffered a bad foul and lay unconscious. The first leg ended in a 1–1 draw and the second leg got called off in 64th minute and rescheduled to be replayed the next day due to the thick fog (Milan was losing 0–1 at the moment). Milan eventually progressed following a penalty shoot-out.

Although the team was not as strong as they had been in the previous season, they were victorious again in 1990. After victories against HJK Helsinki, Real Madrid and KV Mechelen, Milan defeated German giants Bayern Munich in the semi-final, thanks to an away goal. The Dutch magic worked again in the final, as Frank Rijkaard scored the only goal of the game through a Van Basten assist to conquer Sven-Göran Eriksson’s Benfica. By winning the final, Milan became the first team which retained the title since 1980, and the last team to do so until Real Madrid would manage to achieve this feat 27 years later. Sacchi would also capture back to back European Super Cups and Intercontinental Cups in 1989 and 1990, and would lead Milan to the final of the 1989–90 Coppa Italia, where they were defeated by Juventus. The following season saw them defeated by eventual runners-up Marseille in the quarter-final, and finish second in Serie A behind Sampdoria, while they were eliminated in the semi-finals of the Coppa Italia by eventual champions Roma. This was Sacchi’s last season with i Rossoneri.

In 1991, Sacchi was appointed manager of the Italy national team, replacing Azeglio Vicini. Sacchi based his Italian selection predominantly on Milan players, especially in the defensive line which featured Paolo Maldini and Franco Baresi; the attacking line was led by talismanic 1993 Ballon d’or winner Roberto Baggio of Juventus. Notable exclusions from Sacchi’s Azzurri selections, however, included Gianluca Vialli, Roberto Mancini, Giuseppe Bergomi and Walter Zenga.

After leaving his position with the national team, Sacchi returned to Milan to replace Óscar Tabárez in December 1996. However, the second spell was unsuccessful with Milan finishing 11th in the league and suffering its worst ever Serie A defeat, losing 6-1 at home to eventual champions Juventus.

Sacchi had brief spells in the Spanish La Liga, taking charge of Atlético Madrid in 1998 after his second spell with the Rossoneri. He could only guide Los Colchoneros to a disappointing 13th place in the league in his only season at the Vicente Calderón Stadium, although they did qualify for Europe having finished as runners-up in the Copa del Rey. He also briefly returned to Parma in 2001, replacing Alberto Malesani, but soon resigned after disappointing results, and was replaced by Renzo Ulivieri. He later returned to Madrid, this time at the Santiago Bernabéu Stadium as director of football at Real Madrid for the 2004–05 season.