The Switzerland international had been linked with a move to Roma.
Xhaka headed Arsenal’s equalising goal during the Gunners’ 2-1 home defeat to Chelsea in a pre-season friendly at the Emirates Stadium on Sunday.
After the game, Arteta told TalkSPORT: “Granit is going to stay with us. He is a key member of our squad.”
Arsenal midfielder Thomas Partey sustained an ankle injury in the first half against Chelsea following a collision with Ruben Loftus-Cheek.
After the match, Arteta told reporters: “I just had a talk with the doctor. He’ll have a scan tomorrow. At the moment, it’s not looking good.”
Arsenal play one final friendly against north London rivals Tottenham on August 8 before their Premier League campaign gets under way against newly-promoted Brentford at the Brentford Community Stadium.