An injury to Kai Havertz has the Gunners considering a return to the market for another goalscoring option.
The Germany international missed the second-half of last season due to injury and his latest setback is now raising alarm bells inside the Gunners board room.
The Sun says Alvarez is emerging as a target for Arsenal, with the Argentina international beginning his second season in Spain after leaving Manchester City a year ago.
For his part, Alvarez is open to a return to the Premier League. His agent has admitted in recent days that the striker is frustrated over the role he has been given by Atletico coach Diego Simeone.
The biggest stumbling block for Arsenal, however, would be the lack of time Atletico would have to first find a replacement before clearing Alvarez to depart ahead of next Monday's transfer deadline.
Atletico would seek around 100m euros to sell Alvarez in the coming days.