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Manchester City will not stand in Mikel Arteta's way should he wish to take on the manager's job at Arsenal.
The PA news agency understands, however, the Premier League champions are not impressed with the conduct of Arsenal and will demand a seven-figure sum in compensation should the Spaniard leave.
Speculation linking the City assistant coach with the vacancy at the Emirates Stadium has intensified after pictures emerged of Arsenal managing director Vinai Venkatesham outside Arteta's house in the early hours of Monday morning.
It is understood two meetings have now taken place and City are unhappy that the London club did not ask for permission to speak to Arteta.
They are especially annoyed because City played at Arsenal on Sunday and no approach was made when club officials met.
City, however, do not have an issue with 37-year-old Arteta, and will allow him to make his own decision.
PA has contacted Arsenal for comment.
Arteta spent five years as a player at Arsenal, including a spell as captain, and now looks set to return to the capital for his first managerial role.
Sunday's 3-0 defeat to City increased the need for the Gunners to end the uncertainty over the position, leaving the club as close to the relegation zone as they are to the top four.
Kevin De Bruyne's first-half masterclass tore them to shreds as he scored twice either side of teeing up Raheem Sterling for the second.
Interim head coach Freddie Ljungberg replaced Unai Emery following his sacking last month but has won just one of his four league games at the helm, while the club are on a run of just one win from 12 games.
Nicolas Pepe insists it is up to the Arsenal players to "wake up" and find a response as he refused to point the finger of blame at Ljungberg.
"Us players have to do better quickly," the club-record signing said. "We have won only one game out of the last 12. It is not enough, we are Arsenal.
"It is about us, not the coach or anything else. We have to wake up quickly, starting against Everton.
"Freddie tries hard, he talks to us, but nothing has changed much in terms of results. It's down to us the players, not the coach.
"Freddie is close to us because he used to be a player not long ago. He knows what we feel so it's easier for us to talk with him. We will continue to work hard to make things better and win again."
Pepe also said the uncertainty over Emery's full-time successor had not had an adverse effect on the team.
"We are not disturbed by the managerial situation," he added. "I had a similar situation in Lille and we kept going. With hard work, it will get better with Freddie or someone else.
"We have big games coming up. We need to keep working so we can get this fourth place.
"We understand the fans. After conceding three goals, they are not happy. They are Arsenal fans, they are used to winning. We need to give them the taste of victory again."
