Gunners boss Arsene Wenger reportedly wants the 22 year old in exchange for Alexis Sanchez, but City boss Pep Guardiola is believed to be unwilling to let the England international leave.
To reassure the player that he is still an important first team player at the Etihad stadium, the Star say that City will offer a contract extension to Sterling despite the player still having almost three years to run on his current deal.
Sterling has had an excellent start to the season in terms of goalscoring. In all competitions this campaign, the winger has five goals in seven outings, including a double in the 5-0 win over Crystal Palace at the weekend. The arrival of Sanchez at City would no doubt reduce his game time though, and it seems Wenger believes that Guardiola could re-consider his decision to keep Sterling.