German champions Werder Bremen made a move for Wiltord but he rejected the deal after failing to agree personal terms.
Wiltord, the Gunners' record signing at £13m until the purchase of Jose Antonio Reyes earlier this year, is said to be demanding a weekly salary of £25,000 - his latest wage at Arsenal.
But with City more than £50 million in debt, Keegan will have to offload one of his current crop of strikers, reports The Times, and Jon Macken is the most likely departure.