The Portugal international joined Barcelona on loan from Manchester City in the closing stages of the recent summer market, and he has made 21 appearances for the La Liga champions during the 2023-24 campaign, contributing three goals and two assists in the process.
Cancelo has two goals and one assist in 15 La Liga outings, while he contributed one goal and one assist in six outings in the group stage of the Champions League.
Barcelona are keen to sign him on a permanent basis next year, with Man City open to a sale, but there are no guarantees due to the Catalan outfit's financial situation.
According to Fichajes, Arsenal, who were keen on Cancelo last summer, could reignite their interest in the right-back if it becomes clear that Barcelona cannot complete a deal.
The report claims that Gunners head coach Mikel Arteta is a huge admirer of the 29-year-old, who has scored nine times and registered 22 assists in 154 matches for parent club Man City.
Pep Guardiola's side would allegedly be willing to let Cancelo leave for a fee of around €30m (£26.1m) despite the fact that the defender has a contract at the Etihad Stadium until June 2027.
Cancelo's first choice is thought to be to join Barcelona on a permanent basis, and in a recent interview with 1PARA1 podcast, he revealed his admiration for the La Liga champions.
"I have always been a fan of Barcelona. Of course, more in the golden era; from approximately 2008, I grew up watching Barcelona play. For me, I grew up watching the best football team play, which is the Barcelona of 2009, and many of my idols played here," he said.
"Xavi, [Andres] Iniesta, and [Sergio] Busquets are the best trio I have ever seen. Sometimes, even now, I see myself watching that team on YouTube as they pass balls, take possession, and play tiki-taka. It was like they were playing against junior teams because of the ease.
"So it was easy to adapt, among other things, because I really like the club, I really like the dynamics of the club, and it has been easy; it has been very easy to adapt.
"My biggest idol has always been Ronaldinho Gaucho. He was the player who encouraged me the most to watch him play on television. Because of his pure talent and because of his magic. What he brought to me and, for example, to my best friend was also incredible.
"With the rivalry that exists here between Barcelona and Real Madrid and him getting the Bernabeu to applaud him, there was something about him that had to be different."
Cancelo spent the second half of last season on loan at Bayern Munich, but the German giants turned down the chance to sign him on a permanent basis during the recent market.