The Croatian is expected to become surplus to requirements at the Allianz Arena next season following the capture of Robert Lewandowski from Borussia Dortmund.
UK newspapers have reported that Arsenal and United are interested in signing the player, but SportsDirect News can reveal that Arsenal are the firm favourites as United continue to miss out on the big names.
A source familiar with the situation said: "Arsenal are in a purple patch at the moment and United are going in the opposite direction. Mario wants guaranteed Champions League football if he is to leave Munich.
Mandzukic has scored 12 goals in 21 games already for Bayern this season.
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