The 33-year-old did not feature the Gunners this season due to a knee injury, but he did return to training in the last month.
Cazorla made 180 appearances in six years for the North London club, winning two FA Cups and two Community Shields.
“Santi is always one of my favourite players to watch. His natural ability with both feet, his speed of thought and movement were central to our best performances in recent years," Chief executive Ivan Gazidis said told the Arsenal website,
"He plays with a joy and freedom which is very rare.
"We wish him well for the future and thank him for his important contribution to our club.”