According to the Algerian outlet Le Buteur, the Gunners will prepare a fresh approach in landing the 26-year-old. They were keen on signing the Foxes wideman in the summer and made an approach for his services.
Leicester demanded €50m (£44.4m $59.7m) to allow the Algerian international leave the King Power Stadium. However, Arsenal's were unwilling to meet the former Premier League winners' demands.
The bid made by Arsene Wenger's side was way less than Leicester's valuation. The Foxes, who gave permission to allow Mahrez leave in the summer, rejected the Gunners' approach. AS Roma also made multiple bids in signing the former Le Harve winger. However, the Italian club failed to meet the Premier League outfit's asking price.
Arsenal are now planning to table another bid, which would be higher than the last bid they made in the summer for Mahrez. The Gunners remain hopeful that they can convince Leicester to sanction their star player's sale.
The report does not mention the figures of the bids made by the Emirates club in the summer, nor about the one they are expected to table in January. They also stress the negotiations between the two clubs can be dragged until the second half of the upcoming transfer window.
Should the deal likely be agreed between the two clubs, Mahrez can complete a switch to the Emirates late in the mid-season transfer window. It is not the first time that Arsenal are interested in the winger.
The Gunners made an approach in signing Mahrez just months after he won the title with Leicester in 2016. The player held talks with Wenger and was in touch with Arsenal's chief negotiator Dick Law.
When asked why the deal did not take shape, Mahrez said, "I don't know what happened. It's football. You never know what will happen. N'Golo had a clause and when he left they stopped those clauses. They said they would never give one to anyone after that.
"They didn't want to sell me. They said, 'Yes, (there will be) no problem if something comes up.' But behind the scenes they were blocking stuff — talking to clubs but just not wanting to sell me."
The Mirror claims that Mahrez has been identified as a replacement for Alexis Sanchez at Arsenal. The Chilean has six months left on his contract and is expected to leave the Emirates, either in January or on a free transfer next summer.
Mahrez has scored six goals and registered five assists in 20 Premier League appearances for Leicester this season.