The Mirror have acknowledged that the Gunners have opened talks with the Bundesliga side for the services of the Swiss international, and have made an opening bid for the classy operator.
While the tabloid suggests that Arsenal have made an offer in the region of £24 million for the box-to-box midfielder, they report that Gladbach are holding out for a fee in the region of £32 million.
It remains to be seen whether the Gunners and Gladbach can come to terms for the player, with an impasse of approximately £8 million potentially a tricky one to surpass.
Xhaka, who made his Swiss debut in 2011, began his career with his hometown club FC Basel, before moving to Gladbach in 2012.
The 23-year-old has made 24 appearances in the German top flight this season, scoring three goals and picking up three red cards.
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While Arsenal moved to sign Egypt international Mohamed Elneny—another Basel old boy—in January, their midfield was badly exposed at the weekend as they conceded three against West Ham United as their feint title hopes slipped away.