Dani Ceballos has opted against a move to Arsenal in favour of joining Real Betis, according to reports.
The Gunners are among the clubs hopeful of signing the midfielder, who was on loan with the Premier League giants last season.
Talks were believed to have taken place between Arsenal and Madrid over a fresh loan deal which would see Ceballos return to London for next season.
Real Betis are also keen on welcoming the 24-year-old back and were looking to rival Arsenal for his signature.
And according to Mundo Deportivo, the midfielder has told Real Madrid that he would prefer a move to Betis.
It is claimed that Ceballos accepts that he has no future at Madrid, but would prefer to remain in Spain despite a positive spell with Arsenal.
Mikel Arteta was hopeful of securing Ceballos' services on loan in order to reserve his funds to make a move for Atletico Madrid's Thomas Partey.
He is trying to offload midfield pair Lucas Torreira and Matteo Guendouzi to raise some cash, but may have to look for other targets if Ceballos is not an option.
When asked about Ceballos’ future on Thursday, Arsenal boss Arteta said: "Well, we have some talks and Dani knows really well what I think about him.
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"He was pretty clear with me as well that his intention was to remain with us but obviously Real Madrid is involved and I don’t know yet what they want to do with the player.
"But he’s a player that we are interested in because we really saw, in the last few months of the season, what he is capable of bringing to us."
Ceballos himself has even hinted he would prefer a return to Betis, after wearing their home shirt while on holiday.
He started his career with the La Liga outfit before departing for Madrid in 2017.
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