The 25-year-old, who has also been linked to Manchester United, is open to a move away from Chinese Super League side Dalian Yifang.
Unai Emery confirmed this month the Gunners have no money for transfers and will only be able to sign players on loan.
But according to Fox Sports, Arsenal will be able to sign Carrasco if they manage to offload Ozil.
The German has fallen out of favour this season and the club are keen to get his £350,000-per-week wages off the pay roll.
It is reported that he has been offered to Italian giants Juventus and Inter Milan.
But the source claims both of the Serie A sides were put off by the 30-year-old's huge wage demands.
Carrasco has emerged as a top target for Emery, but rivals Manchester United have also indicated interest.
The winger's partner – former Miss Belgium winner Noemie Happart – claimed the Red Devils are desperate to sign him.
Speaking to RTBF, she said: "There are lots of clubs looking at him. Lots of clubs have been in touch with him. Lots of clubs are interested.
Mesut Ozil vs Yannick Carrasco stats this season
Mesut Ozil
- Games: 13
- Minutes played: 980
- Goals: 3
- Assists: 1
- Goal involvements: 4
- Chances created (inc assists): 23
- Passes: 565
- Passing accuracy: 87.26
Yannick Carrasco
- Games played: 25
- Minutes played: 2239
- Goals: 7
- Assists: 5
- Goal involvement: 12
- Chances created (inc assists): 32
- Passes: 780
- Passing accuracy: 79.62
"Yannick has received offers from Germany, Spain, England and Itlay but nothing has been truly concrete up to now, nothing has been signed."
He has scored seven goals and made five assists in 25 games for Dalian Yifang this season after he joined in February 2018.
It was reported that Arsenal held successful talks with the former Atletico Madrid star earlier this month.
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