Alberto Moreno has snubbed Arsenal by agreeing a five-year deal with Villarreal.
The left-back departed Liverpool on a free transfer at the start of the month.
And reports claimed Unai Emery was lining up a reunion with his former Sevilla star.
However, Arsenal have missed out on Moreno after he agreed to return to Spain with Villarreal.
Moreno joined Liverpool in 2014 and was a regular under Brendan Rodgers.
However, Jurgen Klopp preferred midfielder James Milner at left-back before bringing in Andy Robertson to seal Moreno’s fate.
He ended up playing 141 times for the club but goes out on a high after being an unused sub in the Champions League final over Spurs.
It means Arsenal will now have to look elsewhere for a new left-back, with doubts over Nacho Monreal and Sead Kolasinac’s futures.
Celtic’s Kieran Tierney is believed to be high on Emery’s agenda.
But Arsenal are struggling to meet his £25m valuation, allowing Italian side Napoli to steam ahead in the race for the Scot’s signature.
Meanwhile, Arsenal need someone to fill Monreal’s boots and could decide to promote exciting academy youngster Adam Lewis to the senior squad.