The Switzerland international joined the Gunners from Borussia Monchengladbach three years ago and has clocked up over 125 appearances since then.
Inter are planning a massive splurge in the transfer market this summer and have got Xhaka’s name on their wanted list.
Unai Emery could be persuaded to cash in on Xhaka, who cost the club £30million, to boost his own spending power this summer.
Emery has been told that if he wants to bolster his £45m transfer kitty this summer he will have to offload some players from his first-team squad
Inter have been watching Xhaka all season but are only likely to move for him if they miss out on their first two choices Barcelona’s Ivan Rakitic and Real Madrid star Toni Kroos.
It comes after Xhaka recently dropped a hint that he is keen to keep on improving his career.
“I’m very ambitious,” Xhaka said. “I want to take the next step.
“Arsenal does not have to be the last stop.”
Arsenal will already be needing one central midfielder this summer with Aaron Ramsey set to depart for Juventus.
And Football London recently claimed Emery wants two things from whoever replaces Ramsey.
The Arsenal boss knows money will be tight this summer – even if they pip the likes of Tottenham, Manchester United and Chelsea to a Champions League spot.
But that has not stopped Emery from earmarking a very particular type of player.
The boss, who has been in charge since last summer, supposedly wants a player who packs dynamism in abundance, with the Gunners needing more legs in the middle of the park.
And Football London also reported that Emery wants a ‘box to box’ midfielder.
Arsenal are currently three points off Chelsea in fourth.
The Gunners travel to Watford on Monday (8pm).