Luiz is in the final year of his contract at Villa Park and Aston Villa have faced the threat of losing him this summer, with several sides keen.
Arsenal have been attempting to agree a fee for Luiz with Villa today, but have had two offers rejected as Steven Gerrard’s men stick to an asking price of £40m.
The Gunners want Luiz, but they are poised to call time on their efforts.
They do not want to overpay for the midfielder and believe Aston Villa’s valuation of a player into the final 12 months of his deal is excessive.
As things stand Arsenal will not be making a third bid for Luiz.
The midfielder is keen to move to the Emirates Stadium, but is not prepared to rock the boat at Villa Park and leave on bad terms.
He will be free to negotiate a pre-contractual agreement with another club from January and it remains to be seen where he is plying his trade next term.