After training in London for a number of weeks, the 16-year-old comes out of the Hatters' celebrated youth academy to join the Premier League giants on a permanent deal
The 16-year-old spent three years with the Hatters' youth programme, and has been rumoured to been monitored by up to 14 Premier League clubs in the process.
Kilburn-based Dawkins, however, has been training with London side recently, even featuring for the Under-16 team.
Head of Youth at Luton, Gregg Broughton, had much praise for Dawkins, insisting that the youth player will suit the Gunners' approach.
He told Luton's official website: "He is very quick both with and without the football, can play off both feet and therefore he will fit in very well with Arsenal's style of play.
"Playing on either wing, he is capable of beating full-backs on both the inside and outside, making him very difficult to play against.
"Tarum initially started in our Performance Centre at Crawley Green and, after impressing in this environment, he was promoted to the Centre of Excellence as an Under-13. Last season he regularly played up a year in the Under-16s where he was regularly monitored by the England scouts and most of the Premier League clubs.
"Despite the club's current non-league status, we continue to produce players with Premier League pedigree. Whilst we have now sold a number of elite players, it must be recognised that these youngsters have joined some of the biggest clubs in Europe."