Theo Walcott has rejected a contract offer from Arsenal but talks are ongoing between the club and player.
The 23-year-old winger, whose contract expires in 2013, wants to stay and is willing to continue negotiations.
Manchester City are aware of the situation and will try to set up a deal for the England international if they get any encouragement from Arsenal.
It is understood Walcott has been offered an improved five-year deal worth £75,000-a-week.
If no agreement can be reached, reports suggest Arsenal will sell him before the 31 August transfer deadline.
City have already made it clear they are chasing another winger, after selling Adam Johnson to Sunderland.
The Premier League champions have been attempting to broker a deal for Swansea's Scott Sinclair.
Walcott, who played for England in Euro 2012, joined Arsenal from Southampton for £12.5m as a 16-year-old in 2006.
He has scored 42 goals in 222 appearances and won 28 England caps during his time at the club.
Last season, he contributed 12 assists in the Premier League, many of which were for Robin van Persie.
Striker Van Persie moved to Manchester United for £24m on 17 August, three days before Alex Song joined Barcelona.
Walcott started the home draw with Sunderland on the opening day of the season but was left on the bench for Sunday's draw at Stoke.
Arsenal waited until after the campaign began to open dialogue with Walcott's representatives.
They feel they have enough cover in wide positions if he is sold, with Lukas Podolski, Gervinho, Alex Oxlade-Chamberlain, Andrey Arshavin and 17-year-old Serge Gnabry all available to manager Arsene Wenger.
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