Right-back Fredericks has developed into a key player for the Cottagers since signing from Bristol City in 2015, playing almost 100 games for the club.
The 25-year-old was named in the PFA Championship Team of the Year on Wednesday and has attracted attention from a number of Premier League sides.
The Sun say Gunners boss Wenger is looking at the possibility of striking a deal for Fredericks, who will be out of contract come the summer.
Arsenal signed Aaron Ramsey and Rob Holding from the Championship and scouts from the Emirates have been impressed by defender Fredericks in Fulhams promotion push.
West Ham are said to be keen to secure his signature but Arsenal are firmly in the mix, with Wenger looking for competition and cover for Hector Bellerin.
Fredericks form has helped Fulham climb to third in the Championship – they could still secure an automatic play-off spot if Cardiff falter.
Fredericks started his career at Tottenham, playing four first-team games after graduating through the academy, and was one of three Fulham players in the PFA Team of the Year.
Arsenal, who are sixth in the Premier League, are also considering a move for Norwich City ace James Maddison.