And the Gunners could land the Ivory Coast international star for as little as £20m.
The 25-year-old got off to a flying start at Old Trafford when he arrived in 2016 from Villarreal.
But he slowly fell down the pecking order under Jose Mourinho as injuries began to plague the defender.
Bailly is still struggling for action under Ole Gunnar Solskjaer and the Manchester United manager is preparing to offload many fringe players in his underperforming squad.
The summer transfer window will see an overhaul take place at United, and Arsenal are on course to take advantage.
Ex-Sevilla boss Unai Emery knows Bailly well from his time in La Liga and has been an admirer ever since.
With the player available on the cheap, he ticks the boxes for Arsenal as the club hunt reinforcements at centre-half.
The news surrounding Bailly’s future comes as:
“The Red Devils are likely to take a hit on the star Mourinho spent £30m on”
According to The Sun, Arsenal will begin negotiations with United at just £20m.
The Red Devils are likely to take a hit on the star Mourinho spent £30m on three years ago.
Bailly was the Portuguese’s first signing at Old Trafford but a departure appears inevitable, especially with Solskjaer set to bring in new faces at the back.
The United man is within Arsenal’s price range, despite their tight budget, and selling to a direct Premier League and top-four rival does not seem to be an issue surrounding Bailly.
The two clubs have done business quite regularly in recent times.
Robin van Persie controversially switched north London for Manchester, while Danny Welbeck went the other way.
And just last season, Alexis Sanchez and Henrikh Mkhitaryan swapped sides.
A move to Arsenal is now lined up for Bailly as he will start United’s summer clear-out, The Sun add.
He is not expected to play for Solskjaer’s side on Sunday when Chelsea visit in the Premier League in a must-win game for United in terms of their hopes of Champions League qualification.
And Bailly may well have played his last game for the club with only three matches left in the season, having not figured since being hooked at half time in United’s miraculous comeback away to PSG on March 6.