The striker netted 29 goals in 44 appearances in all competitions last season, scoring twice in last month's FA Cup final triumph against Chelsea before netting in the Community Shield win over Liverpool.
Aubameyang had just 12 months left to run on his contract, but he has put pen to paper on a new deal to end speculation over his future.
Arteta is delighted to keep the 31-year-old, saying: "It was important for Pierre-Emerick to stay with us. He’s a superb player with an incredible mentality.
"Being the player to have taken the least amount of time to reach 50 goals with this club tells you everything you need to know about him and his way of working.
"He’s an important leader for the team and a big part of what we’re building. He wants to be up there with the best players in the world and leave his mark. He can achieve that here."
Technical director Edu added: "It’s clear Auba loves the club and everything we stand for on and off the pitch.
"He’s obviously a very important part of the team so we’re all delighted he has committed his future to us. It’s a big boost for everyone – fans, team-mates and staff."