The 34-year-old Spaniard is retiring after a five-year stint with the Gunners, during which time he won two FA Cups.
“Following recent media speculation surrounding my future I can confirm that I will be leaving Arsenal and retiring from playing to take up a coaching position at Manchester City,” Arteta wrote on Twitter.
“I’ve enjoyed an amazing five years at Arsenal and it’s been an honour and a privilege to captain such a great club,” said Arteta.
“I am now looking forward to the challenge ahead at Manchester City. The opportunity to join Pep Guardiola and his team was an amazing opportunity for me and I am incredibly excited for the future.”
Arteta began his career at Spanish giants Barcelona and had spells at Paris Saint-Germain, Rangers and Real Sociedad before moving to Everton in 2005, and Arsenal in 2011.
“Throughout my career I have always been interested in more than just the playing side and have had a passion for helping progress and develop the team outside of just my own role as a player,” added Arteta, who has been troubled by injuries in recent seasons.
“Coaching has always been something I’ve been keen to go in to and over the past few years I’ve worked hard off the pitch as well as on it to develop my skills in order to put me in a position to be able to pursue a coaching role once I finished playing.”
Guardiola’s first match since taking over from Manuel Pellegrini as City manager will be against Manchester United in a pre-season tournament in China on July 25.