The 42-year-old has been in charge of the Gunners since 2019 and has led them to successive second-place finishes but had entered the final 12 months of his deal at the club.
Arteta called for calm last month regarding his contract situation, insisting his focus had been on the transfer window.
His new deal comes on the eve of Arsenal's Premier League clash against fierce rivals Tottenham on Sunday.
Since leaving a coaching role at Manchester City to take over from Unai Emery at the Emirates, Arteta – a former Arsenal player – has since overseen plenty of success and has returned the club to being title challengers.
In his first season in charge the Gunners lifted the FA Cup in 2020, while they secured two Community Shield victories in 2020 and 2023.
They have also finished as Premier League runners-up in the last two seasons, pushing champions Manchester City in enthralling title battles.
Arsenal are currently fourth in the table after three Premier League fixtures this season, registering two wins and a draw and begin their Champions League campaign next week against Atalanta.
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