The 22-year-old Ecuador midfielder emerged a target for Mikel Arteta who was in search of a midfielder.
Arsenal are currently sitting on top of the Premier League table and needed cover for Granit Xhaka and Thomas Partey just in case of injury.
The Gunners have already lost Mohamed Elneny due to injury and Albert Sambi Lokonga was the only midfielder left.
It was reported few days ago that Arsenal placed a bid of £60m for Caicedo but was rejected.
Reportminds Blog understands that Brighton valued the player in region of £80m which Arsenal couldn't match.
Meanwhile sport journalist Fabrizio Romano has confirmed that the two clubs aren't speaking about the transfer of player.
Mosies Caicedo was banished from the training ground until the transfer window ends on Tuesday mid night.
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