Sanchez is struggling at Manchester United and is said to be keen on a quit exit after less than a year at the club.
The Chile ace has been linked with a move to PSG while teams in Spain and Italy are keeping tabs.
But bookmakers Ladbrokes have slashed their price on a shock return to Arsenal.
Ladbrokes have cut their price to 5/1, from 14/1, making them among the favourites to sign him.
Alex Apati of Ladbrokes said: “Things haven’t exactly gone according to plan for Sanchez at United and with the player reportedly wanting out, he could soon find himself back in North London.”
Sanchez joined United from Arsenal in January in a deal that saw Henrik Mkhitaryan go the other way.
The 29-year-old signed a stunning deal worth near £500k a week, which will prove a stumbling block wherever he wants to go next.
He will either have to take a huge cut in wages or United will have to supplement his salary – which they won’t do for Arsenal.
Sanchez is said to be frustrated at United for three reasons: his lack of friendship with his team-mates, Jose Mourinho’s methods and the breakdown of his relationship with long-term girlfriend Mayte Rodriguez.
Sanchez is reportedly lonely, bored and frustrated in Manchester and he’s recently been in and out of the team.
Mourinho has even left him out of his squad completely in recent weeks or used him off the bench.
Sanchez has scored just once this season – in the comeback against Newcastle – and has rarely impressed.
Sanchez’s former boss Arsene Wenger, who despite indulging the forward managed to get the best out of him at Arsenal, had his say on his current predicament.
“I believe he has lost confidence,” Wenger told beIN Sports.
“The strength of Alexis Sanchez is to take initiative to dribble and to take people on.
“Those are the players who are most vulnerable when they lose confidence their game is based on that and having that feeling to take initiative, he has lost that slowly.
“Since the start of the season he had a high level of physical energy but he has lost that as well. Certainly he is refreshed now because Mourinho left him out for a while.”
Sanchez was offered a bumper new deal at Arsenal but eventually left for United meaning the Gunners could pay Mesut Ozil £350,000 a week, but they wouldn’t be able to afford him and the Chile ace at the same time.