The Real Madrid loanee has been heavily linked with the Gunners and their north London rivals Tottenham.
Ceballos remains on holiday until July 29 after his hectic summer playing for Spain’s U21 side.
But upon his return, he will link up with Arsenal and not Real Madrid, claims Spanish outlet AS.
It is reported that Ceballos could travel to London on Tuesday to undergo a medical and sign his new contract.
He will then have his photo taken with the famous Arsenal shirt, no doubt sending fans into raptures on social media.
The 22-year-old will join on a one-year deal before returning to Real Madrid where Zinedine Zidane expects him to fight for a place in the first team.
Ceballos impressed at the U21 European Championships for Spain, leading Los Blancos to believe the player does have a future at the Santiago Bernabeu.
Unai Emery was asked about a potential move on Monday – and the Arsenal chief confirmed the club’s interest.
“We were speaking about the possibility to sign one player on loan and we have different names,” he said.
“The club was working on that. Ceballos is a very good player, I know him from Betis at the beginning and also at Real Madrid.
“He played very well with the under-21s, they won with his national team in this competition.”
Emery’s side have been impressive in pre-season so far but face Real Madrid on Wednesday.
“We started to play against Colorado Rapids with a lot of young players and progressively we are using less minutes and to share with the experienced players,” Emery said when asked about Arsenal’s young players.
“It depends on the matches. Tomorrow, at the beginning I want to take more minutes with the players thinking about our progress for the first match against Newcastle.
“But also, we are going to use some young players at the beginning or during the match to continue trying with this difficult capacity against Real Madrid.”