Dani Ceballos will join Arsenal after Real Madrid rejected an offer from Tottenham to sign the Spain U21 star.
Spurs had offered to sign Ceballos on loan with an option to buy at the end of the season.
ESPN says Real did not want to lose Ceballos permanently and so chose the Gunners offer.
Zinedine Zidane is an admirer of the young midfielder and wants him to improve his game before returning to the Bernabeu.
Ceballos will became Unai Emery's second signing of the summer, with French defender William Saliba also expected to join this week.
AC Milan and Sevilla had also shown an interest in the 23-year-old.
