The Gunners have been trying to raise funds to sign their top midfield targets – Lyon star Houssem Aouar and Atleti’s own Thomas Partey – though have struggled to find buyers for their surplus-to-requirements players.
Torreira had been in talks with the likes of Torino and Roma, but none of the Uruguayan’s suitors were prepared to pay Arsenal’s £22million asking price.
Crucially, there is no obligation for Atleti to buy Torreira outright at the end of his stay, though they will have the option to do so for that £22m fee.
Before the 24-year-old’s arrival can be announced, however, Atletico need to offload Mexican midfielder Herrera to free up a place in the squad and recover some funds.
The Gunners are not currently in a position to deposit the £45.7m release clause and are still trying to sign Aouar, with Lyon appearing slightly more amenable towards negotiating a price Arsenal could afford.
Torreira made a bright start to his Arsenal career but has struggled for minutes under Mikel Arteta and has been convinced by Diego Simeone that he will get plenty of game time – and play a key role – at Atletico.
Arsenal are still hoping to offload a number of other players, preferably on permanent deals, with talks ongoing over the likes of Sokratis, Matteo Guendouzi and Sead Kolasinac.