Ceballos joined the Gunners from Los Blancos in the summer of 2019 for one season and extended the stay for another year last summer.
Despite showing flashes of his brilliance, Ceballos largely underperformed at the Emirates Stadium and heads back to Spain with his future in the Spanish capital also in limbo.
Ceballos failed to score a Premier League goal during his stay in England, despite making 49 appearances in the top flight in his two-year stay.
Last month, the 24-year-old former Real Betis midfielder proclaimed that his talents were better suited to the La Liga than the Premier League.
He leaves Arsenal with an FA Cup winners’ medal from last season, paying tribute to the club’s fans in his farewell message.
“Thanks Arsenal and thanks to all Gunners for welcoming me with so much love from the very first day I wore this jersey, for letting me experience the feeling of being a Gunner and allowing me to be a part of your family all this time,” Ceballos wrote on Instagram.
"A complicated year - for many reasons - has come to its end. Especially for having missed the chance of living home matches in the Emirates with our supporters. Still, I assure you that I will never forget your warmth and support in every moment.
"I am sure that Arsenal, being a historic and great team, will soon be back on top, winning championships and being a reference as it is and always has been. This club, and especially its supporters, deserve it, and I am confident that they will achieve it.
“Thanks to all those people who are part of the team: coaches, kit men, medical staff, communications and marketing team, employees, managers and especially the supporters.
“I want you to know that I have always worked very hard and tried my very best for this crest and this jersey.
“I wish you all the best and the success that I'm sure will come.”
