The 24-year-old winger is a rising star at Ligue 1 outfit Lille.
He’s scored 35 goals in 74 games in his two years at the club.
Unai Emery was thought to have had a seriously limited budget this summer.
But the north Londoners have stunned Europe’s elite by swooping for the £72m-rated in-demand ace.
“Nicolas Pepe is set to join Arsenal”
A source close to the player told Ivorian outlet Sportsmania that Pepe’s head was turned after Arsenal put together a compelling financial package.
It’s suggested he was also impressed by Emery’s vision for the club.
Arsenal have reportedly tabled £7.2m a year. Napoli, who had also been in the hunt, were only willing to give £5.4m a year.
Emery has also been linked with Celtic star Kieran Tierney.
However, the move looks deadlocked after the Scottish champions snubbed two bids.
Club hero Ray Parlour has warned that improving his back line must now be Emery’s priority.
“The worry for me has always been the defence,” he told talkSPORT.
“We’re talking about [signing] good players but we aren’t talking about no defenders at the moment.
“Defenders is probably the key area where we are missing at the moment.
“We know about [Laurent] Koscielny’s situation, that has not been great for the club, him not going on tour.
“That is the area for me where they’ve got to address big time if they’re going to have any chance to get in that top four again.
“I really hope they get Tierney because I think he’s a real quality player.
“[Hector] Bellerin is back on the training field now and he’s kicking balls, which is great, he’s really progressing well.
“[Rob] Holding is training so he can’t be too far away but he’ll need six or seven games to get back into full speed.
“It’s an area where you’re losing Koscielny. If you do lose Koscielny, he’s your captain last season, a real experienced player at the back, so they need to replace him. Especially with some of the defensive performances last year, which weren’t good enough.
“That’s what let them down in the end because the goalscoring at the other end was no problem with [Pierre-Emerick] Aubameyang, [Alexandre] Lacazette, them sort of guys.
“It’s one of those situations where you’ve just got to wait and see what happens with the transfer window.”