The 19-year-old made his breakthrough with the Gunners last season as he made nine appearances for the first team, scoring one goal in the process, but he is unlikely to have the opportunity to build on the last campaign this term.
The arrival of Alexis Sanchez will move Gnabry further down the pecking order at the club, with Theo Walcott, Alex Oxlade-Chamberlain and Lukas Podolski all more likely to start out wide for Arsene Wenger's side.
Santi Cazorla can also play out wide, and as a result, a loan move to another Premier League side could help Gnabry develop this season.
Three clubs are believed to be battling for the German, as Crystal Palace, Southampton and Newcastle are all hoping to land the pacey winger on loan for the season.
Gnabry is not keen on a move away from Arsenal as he wants to fight for a place in the first-team this season, but the club have told him that he is part of their long-term plans, and a loan move will benefit all involved.
A move to Palace would keep him in London, although a move to any of the interested clubs would give Gnabry the chance to play regular football.
Southampton will be a new-look outfit under manager Ronald Koeman and a move to St Mary's Stadium may suit Gnabry best as he would be a part of a side that likes to play fluid, attacking football - a system that he thrived under at Arsenal last year.
Gnabry has a bright future ahead and will likely be a future star for the Gunners, but a move away on loan this season would give him the chance to prove himself to Wenger more than if he were to remain with Arsenal.