After working for his father as sports chief of Hamburg, the Premier League holders' new employee signed a contract at the Etihad Stadium despite having two years remaning on his deal with the Bundesliga side.
Arnesen senior - the current sporting director of the German club - told mopo.de: "For him and his development this is a huge step. One step that I am so glad he is taking.
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"It's great for him. But bad for HSV."
Hamburg have also lost another scout to City, Jan Ricka, after being headhunted by Roberto Mancini.
His speciality is finding talent in the Czech Republic and Slovakia.
Both scouting jobs took effect from July 1.