Carlo Ancelotti has asked to be released from his contract at Paris St Germain, according to sporting director Leonardo.
Bayer Leverkusen forward Andre Schurrle remains hopeful of leaving the Bundesliga club in the summer.
The England forward, who is in the final six months of his current contract, rejected a five-year offer worth £75,000 a week in August.
But the uncertainty over his future is now set to come to an end, with a deal agreed in principle following talks between Arsenal and their top scorer's advisors on Thursday.
Manager Arsene Wenger said he hoped for a conclusion before Sunday's visit to Chelsea and, after a string of protracted transfer sagas involving his players, can finally celebrate a satisfying one, Sky sources understand.
Robin van Persie, Samir Nasri and Cesc Fabregas all left the club after months of speculation.
But Walcott has committed to the club that signed him from Southampton as a 16-year-old in 2006.
Meanwhile Wenger is hopeful Abou Diaby can finally overcome long-term injury problems to take his place in the Patrick Vieira midfield enforcer role at the heart of Arsenal's "puzzle".
The 26-year-old started both the Gunners fixtures last week after more than three months out with a thigh problem and is in line to anchor the midfield again at Chelsea on Sunday.
It was the latest in a long line of injury setbacks for the combative Frenchman, who had recovered from a potentially career-ending broken ankle after a tackle from Sunderland defender Dan Smith in May 2006.
But Wenger feels a fully-fit Diaby can help drive the Gunners on as they aim to claw their way back into the top four of the Barclays Premier League.
"With the way we have structured the team, Diaby is an important part of the puzzle in our team because he adds qualities that we need in the middle of the park," Wenger said.
"He has power and long strides. Diaby is the closest to Patrick Vieira in his style that we have seen for a long time."
Wenger feels Diaby can get the chance to fulfil his undoubted potential.
"I faced exactly the same questions with (Robin) van Persie and for a while everybody thought Van Persie will never play a season, but last year he played 55 games," he added.
"They can get over this cycle, but you always have a little fear that another injury can come in.
"We had that for a long time with Van Persie and suddenly he got over it and I hope Diaby is over it now as well."
Arsenal head to Chelsea boosted by their midweek FA Cup third-round replay win over Swansea and also close to seeing Walcott sign his extension.
Chelsea have struggled to find their form at Stamford Bridge under interim manager Rafael Benitez, and threw away a 2-0 lead as Southampton fought back to secure a draw in their Premier League game on Wednesday night.
After failing to produce the required performance in last weekend's timid 2-0 home defeat by Manchester City, Wenger accepts his side need to start coming up with the goods when it matters.
Chelsea's home support have been vocal in their disapproval of Benitez, but Wenger insists Arsenal must focus on raising their own game.
"The confidence of the crowd in the team plays a big part, but let's not hope on any weakness of Chelsea, let's just focus on our strength," said Wenger, who will have defender Laurent Koscielny available after serving his one-match suspension following a red card against City.
"You want to go there and be at your best, that is all you can do because you never know how your opponent will turn up."