The homophobic banner was shown by fans during the 1-1 draw in the Champions League match Tuesday night.
The banner featured an drawing of Arsenal midfielder Mesut Ozil standing without pants in front of the club's signature cannon. It was unfurled ahead of kick-off.
Despite the small size of the banner, the Bundesliga champions could well find themselves on the end of a very large fine if previous incidents are anything to go by.
The chief of press for UEFA, Pedro Pinto revealed the proceedings on Twitter earlier today.
He posted: "UEFA has opened disciplinary proceedings against Bayern Munich for an offensive banner at last night's UCL game against Arsenal."
The 25-year-old Ozil was withdrawn at half-time, after injuring his hamstring, before his team lost 3-1 on aggregate.