However, Mendyl had previously travelled to London ahead of a proposed move to the Emirates Stadium, and the Bundesliga club's sporting director, Christian Heidel, insists that paperwork problems are all that stopped the transfer.
"I think otherwise he would have gone to Arsenal," Heidel said, when asked about the work permits.
The 20-year-old made 13 Ligue 1 appearances last season, and is excited about the prospect of playing in the German top-flight.
"I am very happy to have signed a contract with such a big club," he said.
"With Domenico Tedesco, I encounter a coach known for improving players. He proved that impressively last year. I too would like to develop further under him and help Schalke 04 play a good role in all three competitions [Bundesliga, DFB Pokal and Champions League].”
Mendyl has won 13 caps for Morocco, but did not play for his country at the World Cup, despite travelling to Russia.