Emirates Stadium side target talented attacking midfielder.
The 23 year old has seen his first team chances restricted over the past year with the arrivals last summer of Toni Kroos and James Rodriguez impacting on his standing at the Bernabeu.
The further capture of Mateo Kovacic in recent weeks will also hamper the former Malaga man’s progress under new boss Rafa Benitez and a move to North London may tempt the Spanish international.
Arsenal are ready to pay £22m to snap up Isco and though Arsene Wenger has a host of similar players the Gunners boss may feel the Real Madrid man can offer an improvement on what he has available.
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Isco has made 108 appearances for Real Madrid since his move to the Spanish capital in June 2013, netting 17 goals and providing 18 assists.