The 23-year-old, who moved back to his hometown club Real from Rangers FC last summer, arrived at Everton in January and made 12 appearances as the Liverpool-based team clinched fourth place in the English Premiership. The FC Barcelona youth product has put pen to paper on a five-year contract.
"I was very surprised by the club, the people and the fans when I came here. What we did last season was so very important for everybody. Now I want to help this team to grow and do something very good next season," Arteta said.
David Moyes's Everton will discover their UEFA Champions League opponents when the third qualifying round draw is made on 29 July. The first leg will be in the midweek preceding their opening Premiership fixture against Manchester United FC on 13 August.
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