Having fallen out of favour under former Gunners boss Unai Emery last term, the 28-year-old appeared to win his place back under Mikel Arteta towards the end of the campaign.
Yet according to Football.London, the German has rejected a new contract that was offered over the summer and will depart the Emirates Stadium once his current deal expires at the end of the campaign following five years service.
Shkodran Mustafi is reportedly ready to leave Arsenal on a free transfer next summer
The report adds Mustafi is said to be keen on a move to Italy with his wife’s Albanian-Swiss family nearby in Switzerland.
He hired a Germany-based agent in January last year, with his father working for the same sports management company.
Mustafi picked up a knee injury which required surgery in July, and he returned to action on Sunday night when he replaced the injured David Luiz in Arsenal’s 1-0 defeat by Leicester City.
Following a knee injury in the summer, Mustafi made his Arsenal comeback on Sunday
Arteta hinted that he wanted Mustafi to remain at the club when quizzed about his contract situation back in July.
‘That’s something the club has to address but he knows my opinion,’ said Arteta.
‘I’m really happy with him as you can see. The way he’s playing, how committed he is with everything we’re trying to do, the level in his performance ever three or four days, he’s been really consistent.’
Mikel Arteta (above) has been keen to hold on to the German who joined the Emirates in 2016
Mustafi joined Arsenal from Valencia in 2016 for £37million and has since gone on to feature 143 times for the club, helping them win two FA Cups.
With fixtures in the Europa League and Premier League coming thick and fast, Arteta could be forced into handing William Saliba his debut due to mounting injury problems at the north London side.
Rob Holding is also injured along with Luiz, although Arteta could field Calum Chambers and Kieran Tierney in the central areas.