Real Madrid are expected to undergo a substantial overhaul of their squad at the end of the season following a disappointing domestic campaign which has left them 15 points off leaders Barcelona with only 10 La Liga games remaining.
One player who could become a victim of Florentino Perez's reshaping of the squad is Modric, and Diario Gol reports that the 32-year-old would be open to a return to the Premier League.
Liverpool are among the clubs interested in handing the Croatian a route back to England as manager Jurgen Klopp looks at potential replacements for Emre Can, who is expected to leave the club on a free transfer this summer.
However, the report goes on to state that Modric would prefer a move back to London, which could hand the edge to Arsenal in the race to sign the veteran playmaker.
Modric's ties with former club Tottenham Hotspur would not be enough to prevent him from joining their North London rivals, and Arsenal are also thought to be keen to bring Modric back to the capital.
Liverpool have already lined up the signing of RB Leipzig midfielder Naby Keita this summer, while Jordan Henderson, Alex Oxlade-Chamberlain, Georginio Wijnaldum, James Milner and Adam Lallana provide further options in the middle of the park.