The Italian club were interested in the Argentine midfielder, but their owner has admitted on radio that he has turned the Serie A side down to join the Gunners
The Italian club were one of a number of European sides interested in the 23-year-old Velez Sarsfield midfielder, but it appears that the Argentinian has decided to join the Gunners instead.
Speaking on Radio Kiss Kiss in Italy, Zamparini said: "We were interested in Alvarez, we were very close to him in January.
"We lost him due to our mistake and I know that he has already signed for Arsenal."
If the Palermo president is correct then this would mark Arsene Wenger's first signing of the summer.