The 27-year-old has struggled for regular minutes since swapping Leeds for Manchester City in 2022.
He has made a total of 26 appearances under Pep Guardiola, taking on the role of a supporting cast member as the Cityzens scooped a treble of trophies last season.
According to Spanish outlet Fichajes, he has been identified as a potential transfer target by Arsenal.
Mikel Arteta’s Gunners currently sit third in the Premier League, one point behind table-toppers Manchester City.
A move to the Emirates Stadium would reunite him with close friend and former teammate Ben White, as well as another ex-Leeds teammate in Eddie Nketiah.
Phillips has appeared as a substitute in each of Manchester City’s last two Premier League fixtures, entering the fray against Nottingham Forest and Wolverhampton Wanderers.