The Gunners are understood to have identified the 17-year-old as a promising player for the future and were eager to offer the youngster a professional contract which would cost them just £300,000 in compensation.
However, L'Equipe reports that PSG have now given Adli assurances over his medium-term future at the club.
The report claims that PSG sporting director Antero Henrique has drawn up a fresh three-year offer which contains guaranteed playing time at the Parc des Princes.
The player had been expected to move to the Emirates Stadium, but the new deal is understood to have changed his mind and he is now set to remain in the French capital.
Adli made his senior debut for PSG on the final day of the 2017-18 Ligue 1 season.