The midfielder impressed on loan with the Gunners this season, and talks were said to be ongoing between the Premier League club and Real Madrid over a fresh deal.
But Real Betis are also keen on welcoming the 24-year-old back, and Ceballos himself is keen to rerturn to play in La Liga, according to Mundo Deportivo.
Mikel Arteta was hopeful of securing Ceballos’ services on loan in order to reserve funds for other transfers, with Houssem Aouar thought to be one of the key targets.
When asked about Ceballos’ future on Thursday, Arteta said: “Well, we have some talks and Dani knows really well what I think about him.
“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.”