'milky-eyed' originates from Modern English as a compound of 'milky' and 'eyed', where 'milky' meant 'resembling milk' and 'eyed' meant 'having eyes'.

'milky' derives from Old English elements related to 'milk' (from Proto-Germanic roots meaning 'milk'), and 'eye' comes from Old English 'ēage'; the compound combination into an adjective like 'milky-eyed' developed in later (post-medieval) English by joining the adjective 'milky' with the participial/attributive form 'eyed'.

Initially used to describe a literal milk-like or white/cloudy appearance of the eyes; over time it acquired a figurative use to describe a dreamy or sentimental expression.