This study investigated the effect of milk replacer incorporation on the physicochemical properties of milk chocolate. The formulations were developed using Mixture Design of Design Expert ® version 6.0. through a binary mixing of skimmed milk powder and milk replacer at following ratios: 100:0, 75:25, 50:50, 25:75 and 0:100. Results demonstrated that milk chocolate which comprised of 100% milk replacer significantly had the darker colour and more viscous compared to the other milk chocolate samples (P≤0.05). On the other hand, the milk chocolate which consisted of 75% skimmed milk powder and 25% milk replacer had better resistance to fat bloom formation throughout the 10 weeks of storage at room temperature (25°C). This study suggested the feasibility of incorporating milk replacer in milk chocolate. The milk chocolate with milk replacer had softer texture and less fat bloom formation compared to the milk chocolate with skimmed milk powder alone.