The Gunners wanted to hire Arteta at the start of last season, but they opted for the experience of Unai Emery instead.
Now Guardiola's assistant is being linked with the job again.
The Sun says City would not stand in his way. And Guardiola would appoint his friend Domenec Torrent as his no.2 in that event.
A City source said to the paper: "Mikel is obviously wanted by Arsenal and Pep could ask Domenec to come back.
"He was here for the first two years and knows the squad inside out and he is very popular."