Xhaka had looked certain to leave the Emirates this month, following a breakdown in his relationship with the fans towards the end of 2019.
The Switzerland midfielder was booed by supporters, after he was substituted during the 2-2 draw with Crystal Palace in October and responded by clearly telling them to ‘f**k off’.
The incident led to him being stripped of the captaincy by former boss Unai Emery and he was widely expected to leave in the January window.
“The first message for him was that I wanted to understand how he was feeling, why he was feeling that way.
“I wanted him to hear from me my opinion on him, and that I was ready to support him and that I was ready to push the club to be supportive of him too, because I thought he could be a really, really good player for us and he could enjoy in this football club playing under me.
“I tried to convince him that way. He thought about it, he had a very positive response afterwards, and I think he changed his mind,” Arteta told a press conference.