Ozil, 28, seems destined to leave north London before long, and would be able to negotiate a free summer transfer with clubs from overseas in January.
United would not be able to thrash out an agreement for the summer but are reportedly considering a winter move for the World Cup winner. However, Riedle wants to see the former Schalke and Werder Bremen star to reignite his career in Germany.
"Ozil going back to Germany? Who knows," Riedle told Omnisport, relayed by Goal. "There's a rumour that he goes to Manchester United. He shouldn't do it.
"Ozil is a quality player. If you see his skills, it's just amazing what he can do on the pitch. We would be very happy if he comes back to a club in Germany, for sure. But I'm not his agent so I don't know where he ends up."
Riedle, who also enjoyed a brief spell with Fulham and even managed the Cottagers for a caretaker spell, believes a return to the German top flight is without doubt the best option for Ozil, who looks unlikely to sign a new contract with Arsenal, but concedes that most if not all Bundesliga sides would not be able to put together the same financial package that Manchester United can offer.
"Best option is, from my point, if he would come to the Bundesliga. It's a really good option because we get another national player back in our league," Riedle added.
"But if he is looking only for the money, then it would be very difficult to find the same kind of money in the German league than he can find in the Premier League."
Ozil's future has long been at the forefront of the minds of Arsenal fans, but for the time being his focus solely rests on recovering from his knee problem, which looks set to keep him out of Arsenal's clash with Watford on Saturday (15 October).