The England international's current deal with the Gunners expires at the end of the season, and the player is free to talk to other clubs about a pre-contract agreement in January.
The winger scored in the North Londoners 3-1 win at West Ham United on Saturday, and Wenger thinks that Walcott will sign a new deal with Arsenal.
"I think Theo will stay," said Wenger. "We are always in touch [with his advisors], so we will see what happens.
"Theo keeps focused and he wants to show he is 100% professional and I have a big respect for that attitude.
"Theo has improved his finishing and while his game is based on movement off the ball, he can score in the middle. I have always said this. He can play wide, he can play centre. If he plays wide or centre, he gets in positions where he can score."
Walcott joined Arsenal from Southampton in January 2006.