The 20-year-old has been offered a new contract by promotion chasing Forest with Billy Davies keen to keep him at the City Ground.
Arsenal are willing to offer an initial £3million after chief scout Steve Rowley watched Lascelles against Bolton Wanderers at the weekend.
The deal would increase based on appearances while Newcastle are understood to have made a bigger offer. Lascelles has been monitored by Arsenal since he was 16.
Forest may contemplate a sale if the bid is increased and he was loaned back. The Championship club have also completed a permanent deal for Jack Hobbs from Hull.
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