Reports in Spain claimed earlier this week that the Spanish giants agreed a £20m fee with the Gunners for the sale of the German World Cup winner.
Arsenal's Premier League rivals Chelsea have also emerged as a possible destination for Khedira, with reports claiming that manager Jose Mourinho is willing to offload John Obi Mikel in order to raise funds for the midfielder.
However, the 27-year-old's representative Jorg Neubauer has rubbished rumours that Khedira has opened talks with either club.
"We are not in talks with Arsenal," The Express quotes Neubauer as saying. "I don't think a fee can have been agreed, otherwise I would have been told.
"When a club have an interest I am sure they will call me and we will speak about things. The same goes for Chelsea. We are talking to Real Madrid but nothing has been decided."
Khedira has one year remaining on his Madrid contract, but following the arrival of Toni Kroos from Bayern Munich, doubts have arisen over the midfielder's future at the Bernabeu.