The Gunners are prepared to part ways with the 21-year-old during the ongoing transfer window as they cannot guarantee him playing time next season.
Nelson, who made nine appearances across all competitions for Arsenal last season, has attracted transfer interest from a number of Premier League clubs.
Premier League newcomers Brentford have been credited with an interest in the England Under-21 international, while Brighton are also said to be keen.
Patrick Vieira’s Crystal Palace are also interested in acquiring the services of the winger from Arsenal and are currently leading the race to sign him.
The Selhurst Park outfit, though, prefer to sign Nelson on a loan deal to get a better look at him before deciding whether to pursue a potential permanent move.
However, Nelson has entered the final year of his contract with the north London giants, making a loan move to Crystal Palace complicated.
Arsenal offered the 21-year-old a contract extension with the view to loan him out earlier this summer, but the player and the club are yet to reach an agreement.
It remains to be seen if Mikel Arteta’s side can convince Nelson to sign a contract extension before joining Crystal Palace on loan.