The Spanish midfielder is currently out injured after undergoing surgery on a troublesome Achilles.
But Arsenal have exercised the clause in his contract for another season, according to a document released by the FA.
Arsenal stars continue injury comebacks in training
Wed, January 18, 2017
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Click through the gallery for the best snaps of Arsenal training
Although Arsenal are yet to officially confirm the news, the document shows Arsenal took up the option on December 20, before he became eligible to speak to foreign clubs on January 1.
It means the 32-year-old's deal will now end in 2018.
Santi Cazorla's last Arsenal performance came against Ludogorets
Earlier this month Arsenal boss Arsene Wenger was unable to confirm when Cazorla will return.
“Santi is far from starting to run again,” Wenger revealed.
"He had a little procedure and we have a meeting with the medical people today to see what it was really. Certainly he will not be available in the next six weeks that is for sure.
Santi Cazorla will remain at Arsenal until 2018
“I hope he will be back this season because once you are out, you have to count six weeks preparation to get back. At the moment he is not at that level.
"Let’s hope he can come back in the next three or four weeks on the pitch.”