The Bundesliga outfit had been close to finalising a deal for the Denmark international, but have ultimately ruled that the 25-year-old is not the right "fit" for the club
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And, after discussions with the Premier League side, it was decided the move will not go ahead.
"Our special thanks go to Arsenal manager Arsene Wenger for the constructive discussions and good co-operation," Huebner told the club's official website.
"There was a willingness from all three parties (to make the deal happen), but ultimately it will not fit."
The Denmark international has been seeking a move through the close-season after finding himself on the periphery of the Arsenal first team.
He spent last season on loan at Serie A champions Juventus, though failed to find the back of the net in 10 appearances, and previously had a temporary spell at Sunderland.