Cazorla has not played for Arsenal since October 2016 after suffering a serious Achilles injury which has required multiple operations.
But the 33-year-old has finally resumed training in the last month and his contract – which ends this summer – could be renewed if he can prove his fitness.
Cazorla and Arteta were close friends at Arsenal before the latter left the club in 2016 to become City’s assistant coach.
And Arteta is now favourite to become the new Arsenal manager, succeeding Arsene Wenger.
Mikel Arteta wants the Arsenal job
City manager Pep Guardiola appeared to give his blessing, saying: “If he decides to move because he has this offer, this option, I will not say you don’t have to go.
“I want the best for my friends and he’s a friend of mine.
“If he decides to go, I will be so sad but I will understand his decision, because it’s his career, his life, his family.”
Mikel Arteta and Santi Cazorla were close friends at Arsenal
According to the Independent, Arteta has already begun thinking about who will join his backroom staff and Cazorla is among those under consideration.
Arsenal want to make an appointment before the World Cup with several issues for the new man to resolve.
Jack Wilshere is out of contract this summer while Aaron Ramsey, Petr Cech and Danny Welbeck’s deals end next year.