The 22-year-old France U21 international is also wanted by reigning Ligue 1 champions Lille, after a series of impressive performances over the past 12 months.
Magpies boss Alan Pardew has long been linked with a move for Yanga-Mbiwa, as he prepares to bring him to the Sports Direct Arena before the end of the transfer window, but according to French radio station RMC, Gunners boss Arsene Wenger is ready to rival Newcastle for his signature.
Arsenal have been rocked by defensive injuries this season, and Wenger is preparing to bring forward a summer swoop for African-born star so as not to miss out on the Montpellier youth product.
"I am flattered by the interest from the French champions, but there is no agreement between the clubs, so I am still here with Montpellier," Yanga-Mbiwa told Sky Sports.
"Newcastle are interested? Well it means my performances have crossed the country. My dream league has always been the Premier League, so you never know.
"But for me if Montpellier have to agree a fee with a team, then who knows? But I would love to play one day in England."
Newcastle are believed to be preparing a £5million bid for the Montpellier captain, so Arsenal will need to either match, or better that offer in order to jump ahead in the race for Yanga-Mbiwa.
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