The 21-year-old moved to the Emirates Stadium from Borussia Dortmund in 2012 and was expected to progress into the first team but will instead ply his trade in the Championship with the recently relegated Cottagers.
"Thomas Eisfeld has joined Fulham for an undisclosed fee," read a statement on Arsenal's official website. "Everyone at the club would like to thank Thomas for his contribution and to wish him well for the future."
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Arsenal boss Arsene Wenger has previously likened Eisfeld to legendary French attacker Robert Pires but the youngster will have to fulfill his potential away from north London.
"He is a Pires type," said Wenger last year. "He appears to be in the box without being noisy and appearing suddenly. When he is there, he finishes well.
"He has that kind of quality that some midfielders have - not many. They have the timing to get in dangerous situations. When they have those dangerous situations, they are like snakes. They bite you to death because they don't miss their first touch.
"He's cool enough in front of goal and he finishes well."
Eisfeld continues a busy summer for Fulham, who have already sealed deals for six other permanent signings, including the £11 million capture of Ross McCormack, as well as the loan signing of Kostas Stafylidis.