The Gunners were believed to be close to finalising a deal for the Frenchman, with a fee close to being agreed with Harry Redknapp's side.
However, the move has stalled with Remy demanding a whopping £80,000-a-week to make the switch to the Emirates, according to the Mirror.
Arsene Wenger is prepared to pay up to £10million for the former Marseille man, but the 27-year-old's outlandish wage demands could yet see the deal collapse.
Remy spent last season on loan at Newcastle, notching an impressive 14 league goals in 26 appearances.
The question then remains whether Wenger is prepared to offer such high wages to a back-up player.
Pacey forward Remy is not willing to take a pay-cut despite having his heart set on joining French team-mates Laurent Koscielny and Giroud.
Remy could also link up with Mathieu Debuchy - also rumoured to be on his way to the Emirates.
The pair played together last season at St. James' Park, as well as knowing each other from the France set-up.
Along with moves for Remy and Debuchy, the Gunners are also hoping to tie up a deal for German international Sami Khedira.
The club are believed to be in advanced talks with the former Stuttgart man and hope to wrap up a deal in the near future.