Arsenal were interested in signing Dele Alli before he moved to Tottenham, according to manager Arsene Wenger.
The England international has excelled since moving to White Hart Lane from MK Dons in February 2015 and has twice won the PFA Young Player of the Year award for his performances in the Premier League.
Former Liverpool CEO Ian Ayre claimed this week the Reds had been interested in Alli only to be put off by what he described as excessive demands from the player.
And Wenger, who has made a habit of naming top players that Arsenal have scouted in their younger days, says Alli was on their radar.
"Yes, I think we looked at him," Wenger told a news conference ahead of Sunday's derby clash. "We watched him a few times because we watched a lot at Milton Keynes.
"He has done extremely well and is a very complete player. It's marvellous at his age. They've done well to buy him and to give him a chance."
A win for Tottenham at White Hart Lane will ensure Spurs finish above Arsenal in the table for the first time since Wenger became Gunners boss in 1996.
However, the 67-year-old has rubbished the notion of a power shift in north London.
"Let's be honest: I've answered that question about a 'shift' for 18 consecutive years. You can't say that the merit of one year has the merit of 20," he said.
"It's certainly one of the few times where Spurs look favourite in people's minds. It looks a bit like that but it doesn't matter much to me.
"The priority for us is to finish in the top four. After that, for pride and for the continuity of our achievement, we want to fight to be above Spurs.
"I expect an open, committed match at high pace. There could be goals in there because both teams play positive football and play in an offensive way.
"We're playing for our future and to continue our run. We know what is needed from us until the end of the season so on that front it's quite easy to prepare.
"I don't think that the top three is decided. But we have an opportunity to be in there only if we win our games."
Wenger confirmed that defender Laurent Koscielny has a "60 per cent" chance of recovering in time from a knee injury, while Alex Oxlade-Chamberlain is fully fit.
Shkodran Mustafi remains two weeks away from a return from thigh problem, however.