The midfielder, who spent time on loan at Hull City last season, completed his medical at St James' Park at the weekend.
The versatile 21-year-old, who can also play at full-back and as a defensive midfielder, made two League Cup appearances for Arsenal.
He has played his way through the England youth ranks up to U20 level and played 24 times for a promotion-winning Hull side last season.
Sky sources understand Newcastle remain in talks for defender Grant Hanley, but Blackburn are holding out for more than the £4m offered.