Real Madrid have accepted a bid of £30m from the Serie A runners-up for the Argentina striker, who is believed to favour a move to North London.
However, the Gunners interest appears to have waned after the Spanish giants increased their asking price for the 26 year old from £24m to £32m.
Arsenal had agreed personal terms with Higuain, though they are unlikely to table an improved offer with having turned their attention to Liverpool’s Luis Suarez.
However, should Real sell to Napoli, that would free up funds for they themselves to make a bid for the Uruguay international, potentially leaving Arsene Wenger empty handed.
The 63 year old has also been linked with a move for Manchester United’s Wayne Rooney, though Chelsea are the odds on favourites with the bookmakers to sign the England international.