The Gunners academy product snubbed interest from Lazio and will sign the new five-year contract worth around £70,000-a-week when the squad return from their pre-season trip to the Far East after their game against Paris Saint-Germain on Saturday.
Talks over a new deal began last December, despite the Nigerian international penning a five-year deal in October 2016.
SunSport understands Arsenal wanted a new deal agreed before the World Cup, however, talks went on the backburner while the club looked to replace Arsene Wenger.
Talks with new boss Unai Emery have been positive and Iwobi has been assured he will be part of the Spanish coach’s new regime in North London.
And the bumper new deal more than doubling his money is a sign of Iwobi’s status at the Emirates and how highly Emery rates the attacking midfielder.
Iwobi made his debut in the defeat to Sheffield Wednesday in League Cup in 2015 and scored his first goal at Everton five months later.
He went on to make 24 appearances that season and made his international bow for Nigeria.
Last season, Iwobi made 40 appearances in all competitions for Arsenal and scored three goals.
The Gunners face Atletico Madrid in Singapore today followed by PSG on Saturday in the same stadium.
Chelsea are up next at the Aviva Stadium in Dublin on August 1, before a trip to the Friends Arena in Sweden to play Lazio three days later.
Emery will get his first taste of Premier League action when he goes head-to-head with Pep Guardiola and Manchester City on August 12.
Meanwhile, Arsenal are attempting to seal a cut-price deal for Sevilla’s World Cup winner, Steven Nzonzi.
The France defensive midfielder, 29, has a £30 million release clause with the Spanish outfit.
But new Gunners boss Unai Emery is aware that any further signings will have to be on the cheap after a busy window.
The Gunners have picked up five players so far this summer, splashing out close to £70 million.
Nzonzi, 29, was a regular during Emery’s two seasons as Sevilla boss.
He has been a long-time target for the Gunners, who want to bolster their defensive set-up before their opener against Manchester City.