The two clubs are working to finalise a deal for the 2020/21 campaign that is again not expected to include an option for Arsenal to buy the 24 year-old permanently.
Midfielder Ceballos has already agreed to move back to the Emirates following talks with manager Mikel Arteta.
Dani Ceballos is set to return to Arsenal for a second season-long loan spell from Real Madrid
Ceballos has already agreed to move back to the Emirates following talks with Mikel Arteta
Ceballos spent last season at the Emirates, making 37 appearances in all competitions, scoring twice and finished the season strongly for FA Cup winners.
That, along with the desire of Madrid chiefs to run the rule their loaned out players including Ceballos in their bid to freshen up Zinedine Zidane’s squad, initially hit Arsenal’s hopes of re-signing the Spain international. Ceballos trained with the Spanish champions on Monday.
However, Ceballos had settled in London and was keen to return.
Knowing Zidane did not consider him part of his plans further increased Ceballos desire to push for a return to Arsenal.
He hopes to play more regularly in order to improve his chances of making Spain’s squad for next summer’s Euros.
Ceballos featured heavily last season and had settled in London and was keen to return
Arsenal’s head coach Arteta has also played a key role in persuading Ceballos to come back to north London.
Speaking about Ceballos last week, Arteta said: ‘We have some talks and 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 but obviously Real Madrid is involved and I don’t know yet what they want to do with the player.
‘But he’s a player that we are interested in because we really saw, in the last few months of the season, what he is capable of bringing to us.’