Eagles boss Alan Smith is believed to have agreed a deal with Gunners manager Arsene Wenger for the former England Under-21 international.
Smith has been trying to bring Upson to Selhurst Park for the past couple of weeks but has not been able to complete the deal.
Wenger is willing to allow Upson to leave the club on loan but faces problems with injuries to influential duo Tony Adams and Martin Keown.
And it is understood that he wants to get the veteran pair back in action before he allows Upson to leave the club again.
The Eagles have been desperate to add some cover to the centre of defence for the past couple of weeks after Neil Ruddock was transfer-listed.
Ruddock, who is available on a free transfer having played his last game for the club, has attracted no offers as yet.
