The Dutch striker spent two years with the Gunners and impressed in the youth ranks, but was moved on to PSV in 2017 after they expressed an interest.
Malen has since gone on to become a star in the Eredivisie, and is currently the divisions top scorer with eight goals in as many games.
Now Tuttosport report that Arsenal want to bring Malen back to north London, but face competition from AC Milan for his signature.
The 20-year-old made his international debut earlier this month after impressing national boss Ronald Koeman, and is now one of Europe’s most highly sought-after talents.
Malen scored 27 goals in 67 appearances for the Gunners’ academy, having signed for the club from PSV’s rivals Ajax in 2015.
He counts Arsenal legends Thierry Henry and Dennis Bergkamp among his idols, hence his decision to move to the Gunners over Man Utd and Chelsea back then, but left to seek first-team opportunities elsewhere.
Following his departure from north London, Malen told De Telegraaf : “That I was sent away from Arsenal is certainly not true. I still had a contract for a year and Arsenal even wanted to extend that.
“I don’t play football for the money. I never did that. Otherwise I would not have left England.”
Arsenal could yet come up against the youngster this season, with PSV also involved in the Europa League.
Malen was on the scoresheet twice in PSV’s 4-1 group stage win over Rosenborg on Thursday to fire them three points clear at the top of the group.
Boly is a firm favourite at Molyneux, but Wolves could be tempted into a sale if they are able to double the £10 million they paid for the 28-year-old when he signed from Porto.