The Norwagian international impressed the Arsenal Boss Mikel Arteta during his loan spell in north London in the second half of last season.
He returned to Real Madrid hoping to secure a place in the first-team.
Zinedine Zidane never seemed to take to Odegaard, but the Frenchman's departure at the end of last term gave him an opportunity.
Carlo Ancelotti has now deemed the 22-year-old surplus to requirements, giving room to Arsenal to make move on their target.
Arteta wants to add another attacking midfielder to his squad before the transfer window closes at the end of the month.
Young star Emile Smith Rowe was Arsenal's standout performer in Friday's limp defeat by Brentford, and has been handed the No.10 shirt for the season.
Arteta wants another midfielder in that position and has identified Odegaard as his main target.
The Gunners were also linked with a move for Leicester City midfielder James Maddison, only to be put off by £70m asking price.
Madrid are willing to do business, and the Daily Mirror reports that Odegaard's agent is in London to begin talks with Arsenal.
Personal terms should not be an issue and Arsenal are increasingly hopeful that Odegaard join them.
Arsenal's loss to Brentford exposed some of the problems.
Arteta has a job to do to turn things around, as Arsenal attempt to become regular top-four challengers once more.
But with Chelsea and Manchester City up next, things could get worse before they get better
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