Arsenal chief executive Ivan Gazidis told his Manchester City counterpart Ferran Soriano that a deal for Alexis Sanchez's replacement had been agreed, the Times have reported.
The Citizens chief executive reportedly approached Gazidis in May over a potential deal for Sanchez, but was told the Chilean forward was not for sale.
Soriano then asked again in July but was again told there was no possibility of a deal. Days before the close of the transfer window, however, negotiations began.
The report in the Times reads: "The idea of including Raheem Sterling in a deal was mooted then abandoned and by Wednesday, City had verbal acceptance of a £60m bid for a player in the final year of his contract.
"However a transfer was conditional on Arsenal recruiting a replacement. At 10am on deadline day it is claimed Gazidis let Soriano know Arsenal had an agreement with another club over that replacement.
Man City have not given up on signing Alexis Sanchez. Will try to sign him again in January. Will cost much less than yesterday's £60m bid— Kaveh Solhekol (@SkyKaveh) September 1, 2017
"Soon it emerged Monaco had accepted a £92m offer for the promising Thomas Lemar. City readied themselves. They did not fly an official out to Chile, where Sanchez was playing a World Cup qualifier, but there would have been no hitches on their side.
"And then, all went quiet. Lemar had not agreed to come to Arsenal, and is said to be more interested in going to Liverpool next summer."
City were said to be furious with Arsenal, who halted Sanchez's proposed departure due to their failure to sign Lemar.
The 28-year-old is in the final year of his contract at the Emirates Stadium, and a new deal for last season's top scorer has grown increasingly unlikely.