Rooney, who scored twice in the 3-2 San Siro win, was on target with a 13th-minute header.
He added his second at the start of the second half and in a virtual exhibition match, Park Ji-sung after an hour and a late Darren Fletcher header completed the crushing victory.
Milan looked off the pace from the start but few could have predicted their total capitulation.
With Daniele Bonera forced to operate at centre back Rooney was wandering free and when Neville found him on the penalty spot there was never any doubt that he would thunder his header beyond Christian Abbiati.
Within a minute of the restart they needed four as more slack defending allowed Nani to charge forward down the left. He then sent in an inviting low cross with the outside of his right boot and Rooney made sure he reached it first to score his 30th club goal of the season. Paul Scholes sent Park through to slide in the third as Milan just about went through the motions.
The introduction of David Beckham as a 65th-minute replacement for Ignazio Abate raised the biggest cheer of the night as the midfielder was given a standing ovation and even tested Edwin van der Sar with a sharp shot. Two minutes from time Fletcher stretched well at the far post to head home the fourth goal and complete Milan's humiliation.
Real Madrid exit
Big-spending Real Madrid failed to qualify for the quarterfinals for the sixth straight season when Olympique Lyon dumped the Spaniards out 2-1 on aggregate.
Real's dream of winning a 10th European title at their Bernabeu stadium in May was shattered by Miralem Pjanic's 75th-minute strike, which secured a 1-1 draw for visiting Lyon in the last 16 second leg after Cristiano Ronaldo's goal in the sixth minute.
Pjanic stunned the home fans when he picked up a loose ball in the Real area with 15 minutes left and hammered in a volley.