Sanchez has been Man City’s main target throughout the transfer window and the club are eager to wrap up a deal before Thursday’s deadline.
The Gunners have reportedly insisted that the Chile international is not for sale this summer, despite the 28-year-old making it clear that he will not sign a new deal before his current contract runs out at the end of the season.
However, the Gunners are now understood to have turned down an official £50m bid from Pep Guardiola’s side and will only sell the Chile international if they make an even bigger offer.
Arsenal are thought to be open to the idea of a player-plus-cash deal which could also involve Raheem Sterling moving in the opposite direction, but City are keen to make it a straight purchase.
Sanchez, who scored 24 Premier League goals for Arsenal last season, is understood to be desperate to link up with former Barcelona boss Guardiola at the Etihad Stadium in order to play Champions League football this season.
Recent reports have also suggested that Manchester United have been offered the chance to make a shock late swoop for Sanchez, although City remain the overwhelming favourites for his signature.