Gunners boss Arsene Wenger is a long-term admirer of the Germany winger and was linked with a move last summer.
Draxler, then at Schalke, went on to join Wolfsburg in a club-record deal worth around £30million.
He enjoyed an impressive debut season at the Volkswagen Arena, scoring eight goals in 31 appearances.
The 22-year-old was part of Germany’s star-studded Euro 2016 squad and played in five of their games before their stay in the tournament was ended by France at the semi-final stage.
Arsenal are now planning to make a fresh move for Draxler and, according to ESPN, are ready to table a huge £43m bid.
Wenger has signed Swiss midfielder Granit Xhaka and Japanese forward Takuma Asano already this summer.
But he wants to add to his attacking options and the skilful Draxler could be a perfect fit for the north London club.