The Spain international has rejoined the Gunners on a season-long loan from Real Madrid.
All parties were keen on a deal being reached with Ceballos unlikely to convince Zinedine Zidane of a first-team spot.
Instead, the 24-year-old will continue his development at the Emirates, where he made a big impression on Arteta.
Ceballos became a staple in Arsenal's starting XI as the season waned.
And he quickly became a fan favourite at the Gunners and Arteta and technical director Edu were over the moon to get the deal over the line.
Arteta said: “Dani was an integral part of our team last season and finished the season in excellent form.
"I love Dani’s passion and commitment and he’s a highly skilful player.
"We’re all delighted to welcome him back and we look forward to seeing him pick up where he left off.”
And Edu said: “We’re thrilled to have Dani back with us for the new season.
"We all know his qualities after an impressive 2019/2020 campaign, which ended with him playing a key role in our FA Cup success.
"We’re excited to add Dani to the list of quality players we are bringing in.”
Ceballos marks the second arrival at Arsenal this summer after Gabriel Magalhaes, who joined from Lille for £27m.
The Brazilian was a top target from Arteta this summer as he looked to bolster his defence.
William Saliba is set to play a major role at the back but the Gunners coach wanted to partner him up with a left-footed centre-back.
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But Arsenal are not done yet and more arrivals are planned, with Atletico Madrid star Thomas Partey the next priority.
However, the Spanish side are demanding the full release clause at £45m - meaning some sales will have to be made in north London.
Hector Bellerin, Lucas Torreira and Matteo Guenduzi have been linked with moves away while a swap deal with Alexandre Lacazette is also on the cards.