In 2000, at the age of 32, Milanič retired early due to injury and to pursue a coaching career in football.

[3] Even after Slovenia's independence, he was included by Yugoslavia in their squad for Euro 1992,[4] but the nation would be suspended due to the Yugoslav Wars.

At the start of the 2007–08 season, Milanič was appointed as the head coach of Gorica, where he helped guide them to a third-place finish in the Slovenian PrvaLiga.

[19] On 4 June 2013, Milanič became a manager of Sturm Graz in the Austrian Bundesliga, with Novica Nikčević as his assistant.

Sturm Graz were knocked out of the Europa League after losing 1–0 on aggregate in the second qualifying round to Breiðablik UBK.

[21][22] On 23 September 2014, Milanič was appointed as manager of Leeds United on a two-year deal, replacing Dave Hockaday.

[23] Milanič parted company on 25 October 2014, minutes after a 2–1 loss to Wolverhampton Wanderers,[24] just 32 days after taking over, for failing to win any of his six games in charge.

[27] Milanič led Maribor to the group stages of the 2017–18 UEFA Champions League after eliminating Zrinjski Mostar, Fimleikafélag Hafnarfjarðar, and Hapoel Be'er-Sheva in the qualifying rounds.

[30] On 7 September 2020, Milanič took charge of Slovak club Slovan Bratislava, signing a one-year contract with an option for further two years, with Novica Nikčević named as his assistant.

[37] On 8 June 2023, Milanič signed a one-year contract with the UAE Pro League side Baniyas for the 2023–24 season.