The Croatian marksman had flopped at Villa Park since his £6 million move from Dynamo Zagreb, and the club had decided to cut their losses and release him from his contract.
The 25-year-old entered into talks with the Italian side and they have now said that they have sealed a deal for him.
Empoli general director Pino Vitale confirmed that a deal had been struck to sign Balaban and that: "Next Tuesday there will be the official presentation".
Balaban trained with his new team-mates on Wednesday and it is believed he will sign a three-year deal.
Empoli are struggling near the foot of Serie A and they will be hoping Balaban can rediscover his scoring touch to help fire them up the table.
