The 28-year-old will be free to leave the Emirates for nothing at the end of the season if he does not sign a new contract at the North London club.
United manager Jose Mourinho has been linked with a swoop for Ozil, who played under the Portuguese coach at Real Madrid for three years.
Riedel, though, believes that his fellow German should snub the Premier League giants and return to the Bundesliga.
"Ozil going back to Germany? Who knows," Riedle told Omnisport. "There's a rumour that he goes to Manchester United. He shouldn't do it.
"Ozil is a quality player. If you see his skills, it's just amazing what he can do on the pitch. We would be very happy if he comes back to a club in Germany, for sure, but I'm not his agent so I don't know where he ends up."
The midfielder has been an Arsenal player since his £42.5m switch from Madrid in 2013.