The Gunners had looked nailed on favourites to snare the exciting youngster last week.
But their arch rivals Spurs entered the fray and tabled a higher offer, thought to be in the region of £27m.
However, the tale is far from over as Saint-Etienne look to exploit the situation.
READ MORE: Man Utd agree £80m Harry Maguire transfer
“Arsenal are keen to sign William Saliba from Saint-Etienne”
With both clubs offering similar cash, the Ligue 1 side will ask Saliba’s preference.
Unfortunately for Arsenal, Tottenham have the lure of Champions League next season.
It’s suggested Saint-Etienne are also keen to play both clubs off each other.
And, if a bidding war ensures, Spurs look likely to come out on top.
Unai Emery only has limited transfer funds this summer and has been told to be thrifty.
The beleaguered Spaniard needs to make tough calls with his current crop of players.
France international Laurent Koscielny is posing a major headache after he refused to go on Arsenal’s pre-season tour.
Nacho Montreal, meanwhile, insists he’s not thinking of leaving north London.
“I belong at Arsenal,” Monreal said. “I still have a contract.
“My idea is to stay here. It’s a great club and I feel really comfortable playing for Arsenal. My idea is to continue playing here.
“I’m not worried. I trust in the club.
“Obviously, a few players decided to retire. Petr Cech, [Stephan] Lichtsteiner, and other players changed.
“That’s how it works in football. One day you’re here, then you’re in another place. But 100 per cent the club is looking for new players. They will come.
“Two captains left last season [Cech and Aaron Ramsey, who has joined Juventus as a free agent]. If I have to be one of the captains I will be very proud.
“Being one of the captains of Arsenal is to feel proud, we’re talking about one of the great clubs and I will accept it of course.
“This season is very important. We need to finish in the top four, the club needs that. The club needs it mainly for the money, then we’ll have more options to bring in other players and come back to where Arsenal belong. I hope we do it.”