While Los Blancos chiefs believe he could still have a long-term future at the Bernabeu, Zinedine Zidane does not intend to use him next season, meaning a season-long loan move suits all parties.
According to Spanish outlet La Sexta, Arteta convinced Ceballos to reject three other offers and rejoin Arsenal this summer.
It is believed the Spaniard’s boyhood club Real Betis were one of the sides interested in signing him, yet he now appears destined to head back to north London instead.
AS are also reporting that Arteta was the “decisive influence” in negotiations, convincing both Ceballos and Arsenal to press ahead with another loan.
Madrid and the Gunners are now finalising the deal, with an agreement said to be “advanced, but not yet closed”.
An option to buy will not be included, nonetheless, as the Spanish champions still hope Ceballos can become a key player for them in the future.
The 24-year-old proved a key member of Arteta’s side last season, playing a crucial part in their FA Cup triumph.
Last week Arteta opened up about Arsenal’s ongoing talks with Madrid, claiming Ceballos has set his sights on a move back to the club this summer.
“Well, we have had some talks," he said.
“Dani knows really well what I think about him – he was pretty clear with me as well that his intention was to remain with us.
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“But obviously Real Madrid are involved and we don't know yet what they want to to do with the player.
“Obviously he is a player we are interested in because we really saw in the last months of the season what he is capable of bringing to us.”