The Gunners are preparing to make Sanchez their highest-paid player after a scintillating first 15 months at the Emirates Stadium, according to the Daily Mail.
The Chilean currently earns in the region of £130,000-a-week but his new terms are expected to see him surpass Mesut Ozil's wage packet of £140,000-a-week.
Sanchez scored 25 goals in all competitions last season following his arrival from Barcelona while he has scored six goals in his last three games for the club.
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BIG MONEY OFFER: Alexis Sanchez could become Arsenal's best paid player
END SPECULATION: Ozil will also be offered a new deal amid interest from Fenerbahce
World Cup winner Ozil is also in line for a contract extension which could see his terms improved.
The German has been linked with a move to Turkish side Fenerbahce at the end of the season but Arsene Wenger is determined to hold on to the midfielder.
Both Sanchez and Ozil's contracts expire in 2018 and Arsenal do not want them entering the final two years of their deals.
DEAL AGREED: Monreal is reported to have already agreed a new three-year contract
Meanwhile the Mail also claim that left-back Monreal has already agreed a new three-year deal to extend his stay in North London.
The Spain international joined the club in 2013 from Malaga but had been linked with a return to his homeland with Athletic Bilbao interested in signing him.
Monreal has established himself as Wenger's first choice left-back ahead of Kieran Gibbs and he now appears to have ended speculation over his future with the new deal.
Arsenal currently lie second in the Premier League after beating Manchester United 3-0 before the international break and face Watford on Saturday.
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