Palacios, 20, is very highly rated and has been included in Argentina’s final 23-man squad for this summer’s Copa America in Brazil.
And he’s expected to leave the Argentine giants after almost four years in the first team.
Palacios was being tracked by a number of European clubs including Real Madrid, who almost signed him for £20million last summer.
But an untimely injury saw Los Blancos pull the plug on the deal.
However, Argentinian radio station Radio Continental claim that Arsenal have emerged as the new favourites to land Palacios and could make an offer of their own.