The Gunners are said to be monitoring him ahead of a January move - although his growing importance at Wolves could make a deal challenging to complete.
The 23-year-old suffered a cruciate knee ligament injury in 2021 which derailed his progress, and he missed 10 months of action.
But he is now beginning to return to the form that saw him earmarked as one of the Premier League's best wingers, as evidenced during Saturday's 2-1 win over Manchester City at Molineux.
The Portugal international received the ball inside his own half before charging down the flank and beating several defenders, before his cross was inadvertently headed in by defender Ruben Dias for an own goal.
The winger, who is represented by super agent Jorge Mendes, has also been linked with a potential move to Manchester United.
The report claims that Arsenal had Neto on their shortlist in the summer of 2022, but were put off due to Wolves' high asking price.
With his contract in the Midlands expiring in 2027, there is an extra layer of complexity involved in any potential deal - but it would be a significant statement of intent by Arsenal and Arteta if they can find a way to get it done.
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