The Spaniard was heavily linked with a move to the Premier League last summer before Real Madrid activated their buy-back clause following his spell with Juventus.
According to Spanish publication Diario Gol, Real president Florentino Perez is ready to sanction a deal for the striker after being angered by his attitude.
Morata is understood to be frustrated at a lack of game-time and he hasn't taken well to sitting on the bench of late.
Alvaro Morata is attracting interest from Arsenal and Chelsea
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And should the situation continue, Perez will allow him to leave if an offer of £51.5m is received.
The report claims Arsenal are interested in signing him with the 24-year-old already receiving offers from the Premier League.
Chelsea are also thought to be keeping tabs on Morata with Antonio Conte a big fan of the forward.
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Alvaro Morata has netted nine goals for Real Madrid this season
Florentino Perez is thought to be ready to sell Alvaro Morata for the right price
With Diego Costa set to consider his options at the end of the season, Morata has been earmarked as a suitable replacement.
Morata, who is under contract with Real until 2021, has netted nine goals in all competitions for Zinedine Zidane's side this term.