Dani Ceballos has been placed on a list of player surplus to requirements at Real Madrid paving the way for Arsenal to make a move.
The Spaniard has been on loan at the Emirates this term but is due back at the Bernabeu in a matter of months.
Zinedine Zidane though is prepared to sanction another loan move for Ceballos which could see him return to north London for another season.
La Liga clubs Valencia and Real Betis are also interested in the 23-year-old, reports the Daily Star.
Ceballos has made 24 appearances for the Gunners in all competitions this term but has sturggled with injuries.
He also tried to cut short his stay at Arsenal before Mikel Arteta told him to stay and fight for his place.
Midfield is an area where the former Manchester City assistant is looking to strengthen.
But whether Ceballos will be interested in staying at the Emirates remains to be seen.
When discussing his future earlier this week the midfielder said: "I finish my contract on June 30. I would have to play for Arsenal, I don’t know how [it would work].
"The relationship of the future would be irresponsible for me to speak about. The most important thing will be to be important for my new team.
"I came to Arsenal to be important and in less than a month it has disappeared [because of coronavirus ]."
Ceballos is still determined to break into the Madrid first team and impressing in his native Spain may enhance those chances.
He was much in demand last summer after an impressive set of displays at the U21 European Championships.
