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.
Get the latest transfer news straight into your inbox!
Want to be on the ball with Jadon Sancho to Manchester United updates? Or perhaps you're a Chelsea fan wondering who on earth could join next?
Well then sign up for the brilliant new Daily Star Sport email newsletter!
From the latest transfer news to the agenda-setting stories, get it all in your email inbox.
How do you sign up?
It only takes a matter of seconds.
Simply type your email address into the box at the top of this article and hit 'subscribe'.
And that's it, job done. You'll receive an email with all of the top news stories every single morning.
You can find out more information on our email newsletter on this link here.
“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.”