Walcott has long been likened to Arsenal's record goalscorer Thierry Henry and now Wenger believes the 26-year-old is ready to emulate the Frenchman by becoming a full-time striker.
"He can be transformed," said Wenger.
'26 to 32 is the best age as a striker and I wouldn't like to miss that golden age'
Wenger on Walcott
"Being 26 to 32 is the best age as a striker and I wouldn't like to miss that golden age. He is naturally gifted to play in this position.
"I work with him in both situations, as a striker and as a wide player. But the quality of the runs is so fantastic with the pace he has.
"When he was younger he was rushing his finishing but he is a good finisher now."
Walcott signed a new three-year deal in January 2013 which expires at the end of next season, and even if a new deal is not agreed, Wenger insists he will be with the Londonders next season.
"He is part of us," Wenger said. "Of the whole squad, he is the player who has played the most games for us.
"Nobody has played more for us than Theo Walcott - I think he has played 202 games."
Asked if Walcott will play often enough amid the competition within the Arsenal squad, Wenger added: "It's a good question, but it is a question you will ask anywhere he will go because he will only be in a big club - and in a big club the competition is there."
And Wenger believes Walcott wants to stay with the club who he joined as a 16-year-old from Southampton in 2006.
"He loves the club and I think he wants to stay, personally," the Arsenal boss added.
"Once a player accepts to talk to you, that means his first wish is to stay. I don't think his desire is to leave.
"If then you cannot find an agreement, that has nothing to do with loyalty."