The north London club are preparing for the departure of their prolific 29-year-old Chilean international to Manchester City and identified Vazquez as an immediate replacement for him.
Unable to force his way into Los Blancos starting line-up on a regular basis, a move to the Emirates Stadium may appeal to the 26-year-old with three Spain caps to his name.
Vazquez is similar in style of play to Sanchez; quick and explosive, he has the characteristics Arsenal manager Arsene Wenger is keen to bring into his squad which has been guilty of producing too many lacklustre performances this season.
With Zinedine Zidane seemingly unconvinced that Vazquez has the requisite skills to make the grade at the Bernabeu, a switch to the Premier League could reignite the Spaniard’s career.
It will be the second time that Wenger has looked to strengthen his attack from La Liga. Deportivo La Coruna striker Lucas Perez, 29, proved a disappointment in his spell at Arsenal, failing to make an impression after signing in summer 2016. He returned to Galicia on a year-long loan with a view to a permanent deal in August 2017.