Arsenal have had an opening bid for Declan Rice rejected by West Ham.
The Gunners made their first move for Rice after talks between the two clubs but West Ham turned down the bid, in the region of £80million, because it falls short of their asking price of at least £100m.
West Ham are also thought to unhappy about the structure of the deal, which contained a number of clauses.
Arsenal are expected to return with an improved offer but it has emerged that Manchester City are exploring their own move for Rice.
Rival interest from City could be bad news for Arsenal but the Gunners remain confident of securing their top summer transfer target.
West Ham chairman David Sullivan confirmed after the Europa Conference League Final that the 24-year-old would be sold this summer.
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Rice has rejected a £200,000-a-week offer to stay at West Ham and has two years left on his contract, so this summer represents the last big chance West Ham have to bank a big fee for the England midfielder.
