Manchester City manager Pep Guardiola has confirmed his assistant Mikel Arteta is in talks with Arsenal but will still travel to Oxford on Wednesday night for their Sky Live Carabao Cup quarter-final.
Guardiola's assistant Arteta has taken part in City's training session on Tuesday and will be among the coaching staff.
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Guardiola said: "He's an incredible person, work ethic, and that's why he's with us. He is talking with Arsenal so I don't know what's going to happen.
"Now it happens with Mikel that teams want him. He knows exactly what we would like but at the end the decision is personal."
Sky Sports News understands talks have reached a "sensitive stage" and Arteta is yet to decide where his future lies despite more than 24 hours of discussions with Arsenal.
When asked if he knew about Arteta's meeting with Arsenal officials in the early hours of Monday morning, Guardiola replied: "Yes, I knew it.
"The organisation of the club is always live, it doesn't always stay the same, what works today might not work tomorrow. The people today maybe won't be here tomorrow.
"He's an adult, he knows exactly what he has to do. He was incredibly transparent and honest with me."
"Now he is part of our group and he stays here. When we have any new news, I will know it and you will know it.
"Now he's here and tomorrow he will travel with us. He trained today, he will prepare the training session before the game."
Arteta talks with Arsenal at 'sensitive stage'
Arsenal's talks with Mikel Arteta have reached a "sensitive stage", Sky Sports News has been told, as the Gunners work to install the Manchester City assistant as their new head coach.
It is understood the Spaniard has yet to decide where his future lies despite more than 24 hours of discussions, including at his Manchester home where Gunners chief executive Vinai Venkatesham and lawyer Huss Fahmy were pictured leaving after 1am on Monday.
Arteta has a strong emotional pull to former club Arsenal but is also said to be conscious of the strength of his relationship with Pep Guardiola and the potential opportunity to eventually become his successor at the Etihad Stadium.
Real Madrid 'kings' of Champions League
City will face 13-time winners Real Madrid in the Champions League last 16, following the draw on Monday.
Although Real are unlikely to be City's preferred opponents, Guardiola insists he is excited for a tie with the Spanish side who were once his rivals when at Barcelona.
He said: "It's an incredible test for us. [Real Madrid are] the kings of this competition.
"We will prepare as best as possible in the two months and try to play a good two games.
"It's positive because we are in the best 16 teams in Europe and that is good news. People think it is not enough, of course it is not enough, every team will want to go through and do better.
"If you want to do well you have to face these types of team sooner or later.
"It is what it is and we want to make a step as a team so we have to face them sooner or later - they have more experience in this competition.
"For us it's an incredible experience to face them and we will try to compete with them and I have incredible confidence in my team."
'City relishing chance to beat Real Madrid'
Manchester City will relish the prospect of facing Real Madrid in the Champions League round of 16, according to director of football Txiki Begiristain.
City were drawn against Real on Monday with Pep Guardiola's side travelling to the Bernabeu for the first leg on February 26 before Real return to the Etihad Stadium for the second leg on March 17.
Real are the most successful side in Champions League history, having won the competition 13 times.
"Real Madrid are a top side, no doubt so it's a difficult draw as Madrid have won this competition 13 times so they are the best in the history of the competition," said Begiristain.
"Though they were second in the group we know their history in this competition, but if you want to be the best, you have to beat the best.
"The best way to start that is with Real Madrid."