The England star has been stalling over a new long-term contract because the reigning Premiership champions were reported to be offering considerably less than his previous deal.
Arsenal explained that the reason for the reduction was due to the fact that Campbell's enormous signing on fee was incorporated into his original contract when he joined on a free from Spurs in the summer of 2001.
The impasse had led to speculation that the 29-year-old could quit The Gunners with a move to Real Madrid or Italy - with Juventus mooted as potential suitors -both mentioned.
However, Arsenal vice-chairman David Dein has confirmed that the club have made real progress in negotiations with the imposing stopper and now expects Campbell to commit his long-term future to the North Londoners.
"We have moved significantly closer to agreeing a new deal with Sol," Dein explained. "It looks a lot brighter."
The news will come as a huge boost to Arsenal who also appear to be winning their battle to persuade Patrick Vieira to snub a move to Real Madrid.