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Rice is said to be an admirer of the style of football Mikel Arteta plays. He would also be more guaranteed of a starting spot at Arsenal than at City.
Arsenal are in the market for midfield recruitment, with Granit Xhaka set to leave for Bayer Leverkusen. Rice has always been their top target since interest emerged at the turn of the year.
They attempted to sign Brighton's Moises Caicedo in January, seeing bids of up to £70m rejected. Caicedo has remained a target heading into the summer window.
However, Arsenal have now pulled out of the race for the Ecuador international as they focus all their attention on Rice. Caicedo could be now set for Chelsea, while Arsenal also pursue a deal for Blues forward Kai Havertz who is valued at around £60m.