Gunners boss Arsene Wenger said "in any hour, anything can happen" but conceded there were no imminent deals - and the £37million buy-out clause for Draxler may prove to be too high.
Schalke sporting director Horst Heldt said he was "very convinced" Draxler would remain at the Gelsenkirchen club.
Arsenal have also been linked with Montenegro international Mirko Vucinic but his agent insists he is set to stay at Juventus.
Newcastle boss Alan Pardew is hopeful a deadline-day swoop for Lyon midfielder Clement Grenier will prove successful as the Magpies look for a replacement for Yohan Cabaye.
Pardew said on Thursday: "We will have to wait and see. I'm obviously hopeful."
Southampton boss Mauricio Pochettino has admitted Italy international Dani Osvaldo may be on his way out of the club.
Osvaldo is serving a two-week club suspension for an altercation with Jose Fonte in training and looks all-but certain to leave before Friday's transfer deadline with Juventus front-runners ahead of Inter Milan and Seville.
Pochettino said "anything is possible" when asked about a move before the transfer deadline.
West Ham have signed former Manchester City midfielder Abdul Razak on a short-term deal.
The 21-year-old Ivory Coast international came through the ranks at City and Russian side Anzhi Makhachkala signed him on a permanent deal in October.
Swansea have signed England youth international Raheem Hanley from Blackburn, The 19-year-old has signed a deal that keeps him at the Liberty Stadium until 2015.
Sunderland midfielder Alfred N'Diaye has joined Spanish club Real Betis on loan for the rest of the season.
The 23-year-old spent the first half of the season at Eskisehirspor in Turkey, but is now heading for Spain.
Sunderland boss Gus Poyet has strengthened his squad further with Argentina international striker Ignacio Scocco.
The 28-year-old has joined the club from Internacional for an undisclosed fee and has signed a two-and-a-half-year deal.
QPR's Moroccan midfielder Adel Taarabt was paraded in AC Milan colours after agreeing a loan move to the San Siro, ahead of a possible permanent move in the summer.
Former Everton defender Joseph Yobo is heading back to the Premier League after making a loan switch from Fenerbahce to Norwich.
Fulham have completed the loan signing of Stuttgart midfielder William Kvist, with the Denmark international moving to Craven Cottage until the end of the season.
The 28-year-old has been at Stuttgart for two-and-a-half years after moving to the Bundesliga outfit from FC Copenhagen and will now part of Rene Meulensteen's squad as the Dutchman looks to keep Fulham in the top flight.
In a clear indication that Fulham expect a busy transfer deadline day, the club announced their routine pre-match press conference had been cancelled. Due to take place on Friday, Meulensteen expects to be otherwise disposed in recruiting new players.