Mustain started eight games for Arkansas as a freshman last season, passing for 10 touchdowns and almost 900 yards.
The 6-foot-3 inch, 205-pound native of Springdale, Ark., guided the Razorbacks to a 10-4 record last season, which ended with a 17-14 loss to Wisconsin at the Capital One Bowl Jan. 2.
Arkansas won the SEC West Division with a mark of 7-1.
A source told the newspaper Mustain is unhappy with Arkansas' run-oriented offense, which he did not expect after Arkansas hired his high school coach as its offensive coordinator.
Both Mustain and USC Coach Pete Carroll were unavailable for comment.
If Mustain transfers to the Pac-10 school, he would be not be eligible until the 2008 season, after sitting out one year under NCAA transfer guidelines for Division 1-A players.