The Spaniard will wear the No. 8 shirt for the Gunners, the squad number previously assigned to Aaron Ramsey, who left the club to join Juventus on a free transfer.
It is not expected to be the Gunners' final summer move, however, with more activity expected before the window shuts.
Indeed, as revealed by Goal, a £27m ($34m) deal has been agreed for Saint-Etienne centre-back William Saliba, with that transfer, that will see the 18-year-old return to the Ligue 1 club on loan for the season, set to be announced in the coming days.
Unai Emery's side also remain interested in signing Crystal Palace winger Wilfried Zaha and a fresh bid is expected to follow having already tested the water with an initial £40m ($50m) offer.
The Eagles are, however, demanding £80m ($100m) for their star man, a figure that is currently out of reach for the Gunners.
Celtic full-back Kieran Tierney is another on Arsenal's wish-list and, despite Celtic's reluctance to sell, there is still hope that they can seal a move for the Scotland international.
The Hoops are sticking to their £25m ($31m) asking price, with the majority of that fee up front, although the north Londoners had been reluctant to agree to those demands up to now.
Speaking following the completion of his temporary switch to Emery's side, Ceballos said: "I’m really proud to be able to wear this shirt. I’m joining an historic Premier League side and it’s a step forward in my career.
"I know the Premier League because I followed it while I was in Spain. It’s a very tactical league but it’s also physical. I’ll need to adapt to the team but I can’t wait to get started. It’s really exciting."
Emery added: "We’re excited to see Dani join us. He is a talented player with big technical ability, creativity and precision."