Arnold has led the Sky Blues to eight wins in eight games in all competitions this season, scoring 22 goals without conceding any.
Now Arnold's success has drawn attention from Dutch club NAC Breda, where he spent three seasons as a player, Fairfax reports.
Arnold is in the final year of his contract with Sydney and could join Breda, who are in the Dutch second tier, as early as June.
While the Sky Blues are believed to be eager to retain his services, it's understood discussions about a contract extension are yet to commence.
At the end of last season Sydney FC chairman Scott Barlow announced his intentions to keep Arnold on.
"In all my conversations with Graham, we talk about him being at Sydney FC long term and building for the future. I'm as committed to that idea as ever and I'd like to think he'll be with us for many seasons to come," Barlow said in April.
Breda have been monitoring Arnold closely and are hoping to sign him on to help build their youth development program.
It's Arnold's proven record with developing and selling players that has made him a prime target of the club.
The A-League-winning coach has been credited for developing local talent including Mat Ryan, Tom Rogic, Alex Gersbach, Bernie Ibini and Trent Sainsbury as well as the sales of players such as Mustafa Amini and Rostyn Griffiths.
Breda's initial offer is believed to be less than Arnold's current Sydney FC deal, however it does include massive bonuses in relation to promotion to the Eredivisie and player sales.
Arnold's agent Tony Rallis declined to comment on interest from other clubs.
