Sterling is understood to be 'fighting' for his future at the Etihad Stadium, where his contract now has just under two years left to run, and talks over an extension have not led to a positive solution.
With City potentially coming under pressure to sell Sterling if he does not extend his stay in Manchester, the Daily Star claims that Arsenal are keeping a close eye on the situation.
The report claims that Sterling is holding out for a weekly wage of £350k at the Etihad, and Mikel Arteta would be keen to reunite with a player who he enjoys an 'excellent relationship' with.
Sterling has started just two of City's six Premier League games so far this term as he prepares to meet former club Liverpool at Anfield on Sunday afternoon. body check tags ::