Arteta has struggled for playing time this season and the Spanish giants are happy to sell him when the transfer window reopens.
The midfielder also wants to leave as he eyes a place in Spain’s squad for the Euros next year.
Arsenal has been struggling recently as they remain winless after six Premier League games.
Goals have been hard to come by and the major reason for that is because they have lacked creativity.
When the transfer window reopens, they have a chance to sort that problem out and Isco might be the player that comes in for that role.
They are not the only team looking to sign him according to the report with Sevilla, Everton and Juventus also linked with a move for him.
Arteta might be able to convince his fellow Spaniard to choose Arsenal over the other teams.
It remains unclear how much Real will ask from Arsenal, but a loan deal until the end of the season might be the way forward.