As exclusively revealed by Goal, the forward is preparing to submit a transfer request to force a move to the Emirates Stadium.
Depsite Liverpool having so far rejected two bids for from the Gunners, Forlan believes that his compatriot would be the ideal recruit for Arsene Wenger.
|9/1||Arsenal are 9/1 with Bet365 to win the Premier League
"Only Luis knows what his plans are but he would be a great signing for Arsenal."
Forlan believes that the Gunners' inability to challenge for trophies in recent years has stemmed from a failure to replace legendary striker Thierry Henry.
"Of course, Arsenal are a very strong team but, for the last years, they have not been able to compete with Manchester United, Manchester City and Chelsea for the title," the 34-year-old continued.
"They have had very good players but have maybe lacked that one special player who you need to win a league as strong as the Premier League.
"United have had Wayne Rooney and City have had Sergio Aguero and Carlos Tevez but Arsenal have struggled since Thierry Henry left."