The Gunners want to sign a new midfielder before the transfer window shuts at 11pm BST and Luiz has emerged as their most favoured option.
Arsenal had already failed with an opening bid, believed to be worth around £20million, and yet once again returned with a higher offer after £23m was deemed not enough.
A fee of £25m was pitched with just over an hour remaining of the window and it was too swiftly rejected.
Luiz has less than one year left to run on his current contract, but Villa are currently insisting that he will not be sold today.
Arsenal’s need for a new midfielder has been exacerbated after Mohamed Elneny and Thomas Partey both picked up injuries last month.
The club have also looked at Palmeiras’ Danilo, but sources in Brazil insist he will not leave today and could only move in January.
Luiz is of long-term interest to Arsenal and they have tracked him for some time, with Mikel Arteta aware of the player from his spell at Manchester City.