Playmaker will not be moving to the Emirates Stadium club this summer.
Arsenal target Julian Draxler has snubbed interest from the Premier League and Borussia Dortmund to sign a two-year contract extension with Schalke, reports German source kicker.de.
The new deal will keep the 19-year-old at the Veltins Arena until at least 2018 and dashes the Gunners hope of landing the midfield playmaker.
Draxler has been repeated linked with a move to the Emirates Stadium, while Champions League finalists Dortmund have also been credited with an interest as they search for a replacement for the Bayern Munich-bound Mario Goetze.
The Schalke star has enjoyed a fine season for the Bundesliga outfit, brushing aside the managerial change at the club to bag 10 goals in 35 appearances this season.
Despite losing Lewis Holtby to Arsenal’s north London rivals Tottenham in January, Schalke had enjoyed a strong second half of the season and are currently on course to qualify for the Champions League courtesy of a fourth-place finish in the Bundesliga.