Atletico are looking at a financial package of €21m (£18.6m) which will comprise a €15m loan fee plus a €6m salary for the duration of the loan.
Arsenal were first linked with the player in December by Spanish publication AS (via Sport Witness), however, a move to bring the 23-year-old looks likely to be on a temporary basis, at least initially.
The rumours come amid claims that the Gunners have also upped their bid for Ukraine sensation Mykhaylo Mudryk.
Despite Arsenal leading the Premier League table by seven points from Manchester City, an injury to Jesus during the World Cup has ruled him out for three months and has left a major attacking void to be filled.
Eddie Nketiah has scored in his previous two league starts, however, Arsenal can’t just rely on the 23-year-old to perform in every single match without having some support and Felix could help ease the burden.
His versatility means the forward can play as either a centre-forward, left-winger, or even as a number ten deployed just behind a lone striker and this could be a big bonus for Arteta.
During his time at Atletico, Felix has scored nine goals and registered six assists while playing as a centre-forward, proving that he has the required attributes to thrive in the role for the 40-year-old, even for the brief spell that Jesus will be missing.
His former youth coach at Benfica, Renato Paiva, once described Felix as “magic” and he could certainly display his creative abilities by joining Arsenal, with Arteta likely to give him a lot more freedom as opposed to being largely shackled at Atletico under the defensive and bullish Diego Simeone.
The north Londoners have coped so far without Jesus, winning both of their league matches since the season resumed after the World Cup hiatus, however, it’s clear that more strength in depth is required if the club are to keep up their excellent form.
Felix can be a superb alternative to the Brazilian, and if the 40-year-old can work his magic and lure him to the Emirates, it will be a massive statement of intent.