The Spain international joined the Emirates club on a temporary deal in the summer of 2019, which was then extended by another season.
Ceballos has featured regularly, scoring twice in 74 appearances in all competitions, but revealed that he doesn’t see his future in England.
"I've had a bad time because I didn't have the consistency I had last year," he told Onda Cero.
"These last five or six games I've played at a good level. To be honest I like La Liga a lot more. The Premier League is more complete but with my style, La Liga is much better for me.
"Another loan would be difficult from both sides, for Real Madrid and for me."
Ceballos, who is set to feature against La Liga side Villarreal in Arsenal’s Europa League semi-final on Thursday, has another two years left to run on his contract in Madrid.
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