The Belgium winger has had a tough season for Atletico and has only been handed seven starts in La Liga by manager Diego Simeone.
Simeone has made the 24-year-old available for the right offer in the current transfer window, but with Arsenal's attentions currently on getting a deal for Pierre-Emerick Aubameyang over the line, it is understood that the Gunners are readying an approach for Carrasco in the summer instead.
Mundo Deportivo have reported that Arsene Wenger's interest has stemmed from the Belgium's impressive displays against Arsenal while playing for Monaco in 2015, while it was at the Emirates where the winger scored his first Champions League goal.
Carrasco managed ten goals in 27 starts in La Liga last season. These stats make it likely that Arsenal will have to fight off other clubs in order to land their man, with Italian greats Juventus having already registered interest.
Alexis Sanchez left the North London club for Manchester United this month. With the possibility of Mesut Ozil and Jack Wilshere both leaving for nothing in the summer, Arsenal are desperately trying to rejuvenate their attack.