The Switzerland captain has been sidelined since suffering a serious knee injury in September's North London derby win over Tottenham Hotspur and was originally expected to be out until 2022.
However, Xhaka is making great strides in his recovery, and Arteta is optimistic that the former Gunners captain will take to the pitch again in 2021.
Offering an update to reporters ahead of Saturday's clash with Newcastle United, Arteta said: "Hopefully sooner than expected, he's in good place. I hope we can have him back before the end of the year."
Xhaka's future remains the subject of much debate, however, with the 29-year-old recently claiming that he would be open to a return to Borussia Monchengladbach when his Arsenal deal expires in 2024.
Arteta also commented on the prospect of Arsene Wenger returning to the club in Thursday's press conference after reuniting with his old coach for the release of the Arsene Wenger: Invincible documentary. body check tags ::