Arsenal see Ceballos as the ideal man to plug the gap in midfield after losing Aaron Ramsey for nothing when he joined Juventus.
Due to that transfer, and another year out of the Champions League, funds are depleted so Unai Emery has had to think outside the box.
And it has led him to the Real Madrid starlet – who helped Spain to an Under-21 Euro Championship win this summer.
The former Real Betis star is highly-rated at the Bernabeu but his chances of breaking into the first team under Zinedine Zidane are minimal.
The Frenchman prefers the likes of Toni Kroos, Casemiro and Luka Modric – yet Sky Sports pundit Dharmesh Sheth has revealed that Zidane is the man with the final call.
“We’re playing the waiting game,” Sheth said.
“The loan move for Real Madrid midfielder Dani Ceballos is dependant on Zinedine Zidane giving the final approval.
“We’re told the player wants to go to Arsenal where he feels he’d get more regular football than, for example, Tottenham who were in talks.”
Meanwhile, Sheth went on to state that there are still two deals in place with negotiations ongoing for the likes of Kieran Tierney of Celtic and Gremio ace Everton Soares.
“Talks are continuing with Celtic over the structure of a £25m move for the left-back Kieran Tierney,” Sheth added.
“Last week the initial offer had been £18m plus add-ons.
“Not enough for Celtic, they want more up front.
“Arsenal still retain an interest in the Gremio forward Everton.
“That’s if, I’m lead to believe, they can’t get the Zaha deal done.”