According to reports in the Chilean's homeland, Pep Guardiola has won the race to snap up the striker.
Sanchez is entering the final year of his Gunners contract and, with no indication he's set to sign new terms, the Chile worldwide continues to be linked with a big-money move away this summer.
German journalist Raphael Honigstein has revealed the two reasons which are now preventing Arsenal star Alexis Sanchez from joining Bayern Munich.
"They have come fifth in the league this year, which we know is not good enough for Arsenal's standards".
However, the Mirror claim Arsenal are not prepared to sell to their Premier League rivals and Sanchez fears he'll have to join Bayern instead.
Alexis is now with his Chile side as they prepare for the Confederations Cup in Russian Federation, and we all know how much effort he puts into propelling his country into the spotlight. He was one of the heroes of winning the FA Cup against Chelsea.
In a rather disappointing season for Arsenal which saw them fail to qualify for the Champions League for the first time under manager Arsene Wenger, Alexis Sanchez was the ray of hope as he single-handedly carried the team on many occasions.
The two European clubs best placed to sign the 28-year-old are Bayern Munich and Juventus, though both sides are likely to offer cut-price fees given that Sanchez's contract expires so soon.
Arsenal announced last month that Sanchez was the "overwhelming" victor of their Player of the Year award after a stunning individual season that saw him score 30 goals across all competitions.