Arsenal have now seen €35 million (£30.7m) bid for AS Monaco winger Thomas Lemar turned down by the Ligue 1 champions.
Arsene Wenger was confident of making the French player their second signing this summer.
The Gunners have identified the 21-year-old winger to replace Alexis Sanchez next season.
Wenger is also chasing Lyon striker Alexandre Lacazette and has seen an initial bid of £44m rejected by the Ligue 1 club as they are holding out for an offer closer to £57m.
Alexis’ current contract with the Gunners is set to run out in 2018 and he is yet to sign a contract extension.
Bayern Munich and Manchester City are leading the race to secure the services of the Chilean forward.
It is believed that the Chilean is holding out for a higher wage packet and has also demanded a winning mentality and more ambition from the Arsenal hierarchy.
Cash-rich Ligue 1 giants PSG have also shown huge interest in the Sanchez.
Sanchez displayed incredible form last term – with 30 goals to his name in all competitions and also guided Arsenal to FA Cup triumph. And now Manchester United and Chelsea have also shown interest in securing the signatures of the Chilean this summer.
And now the Gunners hierarchy are desperate to secure the signatures of Thomas Lemar from Monaco if Sanchez leaves this summer.
And Arsenal have now launched an improved bid of £35million for the French teenager.
However, Ligue 1 champions AS Monaco, who have already offloaded Bernardo Silva to Manchester City – do not want to sell too many of their stars this summer.
Tiemoue Bakayoko is on the brink of joining Chelsea and is due to complete a medical at Stamford Bridge by the end of this week. Manchester City are also confident of luring away full-back Benjamin Mendy to the Etihad this summer.
Monaco defender Djibril Sidibe has also been heavily linked with a move and Kylian Mbappe and Fabinho has also drawn huge interest from top-flight European clubs and are expected to part ways with the Ligue 1 club.
At such a juncture, the Ligue 1 champions are playing hardball over Lemar.
Monaco are keen offering a new deal to the 21-year-old and the player himself wants to stay at the Stade Louis II for one more season before moving on.
Lemar displayed incredible form last season – with 14 goals and 11 assists to his name, as Monaco outplayed PSG to the Ligue 1 tile and also reached the semi-finals of the Champions League.