However, in the midfielders second term at the Emirates, he has not been favoured by Mikel Arteta compared to his partners Granit Xhaka and Mo Elneny, only gaining one assist from 23 games in all competitions.
The Spaniard has been disappointing, starting in nine of Arsenal's 17 Premier League matches. In the last five league matches, Ceballos has only started twice, being benched against Chelsea, as well as playing the last nine minutes in the Gunners' 1-0 victory against Brighton.
Recent performances and Dani's dream
The midfielder appeared in Arsenal's most recent 4-0 success over West Bromwich Albion on Saturday night, displaying his agility and creative ability that Arsenal are so desperate for.
Although Ceballos performed admirably on Saturday, he has been inconsistent with his performances.
Accompanied with his recent displays, the Spaniard has expressed his admirations of returning to Spain, as well as rejecting the idea of a third year in North London:
"A third loan? No my goal is to return to Real Madrid and be important at the best club in the world.
"A believe that one day I will come back and be able to return the affection that the fans once showed me." - Dani Ceballos to Spanish radio show El Larguero.
With the January transfer window now open, Arsenal are eyeing up the likes of Emi Buendia from Norwich City and the talented Julian Brandt of Borussia Dortmund. Is it worth keeping the inconsistent Ceballos?
The Gunners have already shipped out Saed Kolasinac and William Saliba on loan, freeing up the wage bill, as well as looking to sell Shkodran Mustafi and Sokratis to build up the club's financial kitty.
It may be worth sending the passionate Ceballos back to Spain to free up space which will allow the Gunners to bring in a permanent, young and creative midfielder.
Sky Sports News' Dharmesh Sheth expressed these ideas on The Transfer Show on Monday:
"If they can free up some wages and if they can free up some space in their squad, then it would pave the way for Arsenal to strengthen in an area they are looking to strengthen which is a creative, attacking midfielder."
If Ceballos remains in North London until the Summer, he has a chance to finish his career at Arsenal strongly, as well as potentially working alongside new January recruits.
However, it is looking likely that the Spaniard may return to Zidane's side, creating an opening and an opportunity for fresh talent to enter Mikel Areta's Arsenal.