The north London club is seeking a replacement for Arsene Wenger, whose 22-year tenure came to an end this season.
The report states that Arteta was "very close" to becoming Arsenal's next manager before a change of heart at boardroom level convinced the club to look elsewhere.
The 46-year-old left French side Paris St Germain at the end of this campaign following a two-year stint where he won one Ligue 1 title and four domestic cups, having led Sevilla to three successive Europa League trophies prior to that.
The 36-year-old, who is a coach at Manchester City, also wanted guarantees that he will have a significant say in which players are to be sold to recoup funds for further investments, with the club's summer budget reportedly at £50m.
However, Arteta's lack of previous managerial experience appears to have seen him lose out to his compatriot. He was replaced by former Borussia Dortmund boss Thomas Tuchel, who had also been linked with the Arsenal job.
Other candidates included Juventus manager Massimiliano Allegri and former Chelsea and Real Madrid boss Carlo Ancelotti, as well as former Arsenal players Arteta, Thierry Henry and Patrick Vieira.
Emery posted a message on his Twitter account when Wenger's departure was confirmed last month - a post which has now taken on greater significance.
Arsenal's next manager will have to work alongside head of recruitment Sven Mislintat and will only be given an advisory role when it comes to transfers. Here are a few facts you need to know.
That's according to former Arsenal striker Alan Smith, who doesn't doubt that Emery has got the ability to succeed at the Emirates. Unai Emery's now the favourite, he's going to be the manager?