Iwobi came through the youth system at Arsenal and has had just 98 appearances for the Gunners.
The Nigeria international has been a regular over the last two seasons, but his future at the Emirates Stadium was believed to be uncertain following the arrival of Unai Emery as head coach.
Recent reports suggest that Iwobi could be available for £22m this summer amid interest from Lazio, but according to The Sun, the attacker has now committed his long-term future to his London club.
The announcement will be made official once Arsenal returns from their pre-season trip to the Far East.
Iwobi netted three goals and registered seven assists in 39 appearances in all competitions for Arsenal during the 2017-18 campaign.
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