The Frenchman’s contract runs out in 13 months, but negotiations are said to be at an advanced stage to secure him until 2008 and the Gunners hope he will sign the three-year extension next month.

Hill-Wood told the Evening Standard: “I am absolutely certain that Arsene will stay at Arsenal.

“I cannot believe he would go there. We are having talks about a new contract and they are progressing well.

“Our negotiations with him are always very gentlemanly and there is no confrontation at all. As far as we are concerned, he can stay here as long as he wants to do the job.

“He is very well paid at Arsenal but he is not particularly motivated by money. I don’t think he would be attracted by a club like Real where, we hear, the president buys the players without telling the manager.

“He has a free rein at Arsenal and we have a very good relationship with him. He is involved in all aspects of running the club: the new stadium, the financial side, the buying and selling of players.

“He knows what we can afford and is happy with that. I would be very surprised if this kind of ‘new challenge’ would have any appeal.”

Since arriving at Arsenal in October 1996, Wenger has won three league titles prompting several European clubs, including Real Madrid last season, to try to lure him away.

There was also a bid by the German Football Association to tempt him to take over the hosts of the next World Cup when Rudi Voller quit after a disastrous Euro 2004 last summer.

Wenger has so far spurned all advances and feels a loyalty towards his players.

Stars such as Thierry Henry, Patrick Vieira and Robert Pires have all signed long-term contracts after reassurances Wenger was committed to the club.

Real came close to signing Arsenal skipper Vieira during the summer but negotiations broke down at the final minute.

Now Wenger could become their first choice to handle their ‘Galacticos’ who include David Beckham, Zinedine Zidane and Luis Figo.

England coach Sven-Goran Eriksson has also been linked with the job but had given assurances he will honour his contract with the Football Association, leaving the way clear for Real to pursue Wenger.

Meanwhile, Sol Campbell is hoping to provide a boost for both Wenger and Eriksson by returning from injury for Arsenal’s trip to Manchester City on Saturday.

The 30-year-old defender made his first appearance since Euro 2004 when he played the full 90 minutes of Arsenal Reserves’ 4-0 win over Coventry at Underhill on Monday night.

Wenger was at Barnet to see the game and after criticising his defence following Saturday’s 2-2 draw at home to Bolton he may be tempted to throw Campbell straight back in.

“It was great to see him out there,” Wenger told the club website, www.Arsenal.com.

“It was his first game for nearly three months and it was a tremendous boost to have him back just before we go into the winter period.

“I could consider him for the next game because we need defensive stability and of course he can help us. You always miss players of this quality.”

Wenger described his defence as “passive and naïve” as they twice surrendered the lead against Bolton and spoke of the qualities the team missed in Campbell’s absence.

“Sol gives us physical strength, recovery power and he is our most experienced player at the back and at some stage of the season that will be important,” said Wenger.

“We need three or four centre-backs in a season and we want him back because of his influence since he arrived at the club has been massive.

“At this stage of the season it is good to go into a period when you need all your players because at the start you do not need to rotate so much.

“But when you go into October and November and players go away for internationals it is good to have everybody available.”

Eriksson will also be monitoring Campbell’s return closely as England face a double-header in the World Cup qualifiers against Wales and Azerbaijan next month.