The Spain Under-21 international shone this summer at the European Under-21 Championships, inspiring La Rojita to the title.
The 22-year-old will wear No 8 at the Emirates.
“The decision has been made,” Ceballos declared. ”This season I will be a gunner!
“I am anxious to start. Hello Arsenal. Here I am.”
“We’re excited to see Dani join us. He is a talented player with big technical ability, creativity and precision,” said Unai Emery.
Ceballos joins Gabriel Martinelli as new signings this summer, with Emery still looking to be busy in the final days of the window.
Fans will have their first glimpse of Ceballos on Sunday at the Emirates Cup where he will make his debut.
Lyon take on Emery’s side as they continue their rebuild after missing out on Champions League qualification and losing in the final of the Europa League final to rivals Chelsea.
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