The Mirror says the Gunners have lodged a stunning £25m bid for Balotelli.
But the Gunners are facing a tough battle from money-bags Monaco who also want the Italian ace.
Reports suggest the 23-year-old has been told he can leave AC as new manager Filippo Inzaghi looks to the future.
Arsenal signed a mega-money kit deal with Puma last season, which has come into effect this year.
Puma also have a deal with Balotelli and it is being reported that the kit manufacturer may be willing to help finance the deal to bring the striker to the Emirates.
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