While it was assumed that Brazilian midfielder Edu would leave the club, Wenger revealed there had been progress in talks, with a four-year deal at close to £35,000-a-week on offer.
Edu has rejected two previous offers but Wenger said: "We are making slow progress. I am more optimistic. We have missed him because we have been without Gilberto Silva and Mathieu Flamini because of injuries."
Wenger also defended his transfer policy, which has promoted youth at bargain prices rather than go for experienced, and more expensive, proven talent.
"I have no regrets about the way we have done things," he said ahead of Sunday's must-win home clash with Newcastle.
"We have invested for the future. You can't do both: buy young players and experienced players as well. Then you don't play the young ones. We made a policy choice. It will come off, I am sure of that.
"We cannot compete financially with Chelsea so we have to find a different way to compete with them."