The Daily Mail newspaper state that talks between Ozil and the north London based club are underway and that both parties expect a positive resolution.
Ozil currently earns £140,000 per week and has two years left remaining on his existing contract.
The 27-year-old joined Arsenal from Real Madrid back in September 2013 for a club record £42 million and helped Arsenal break their long wait for silverware with back-to-back FA Cup wins.
Ozil has recorded 18 assists and with two matches left this season he still has a chance of matching the Premier League record of 20 set by Thierry Henry.
The Germany international missed the Gunner’s last game due to a hip injury meaning his last chance to break the assist record will come this weekend.
Arsenal take on an already relegated Aston Villa at the Emirates on Sunday.