The France Under-21s international is believed to have been one of two primary midfield targets for the Gunners this summer, along with Atletico Madrid's Thomas Partey.
Speaking for the first time since the transfer collapsed, Aouar has suggested that he was more interested in staying at the Groupama Stadium.
"I felt that I can still bring something to this team," Aouar said on the back of Lyon's 1-1 draw with Marseille on Sunday - a game in which he scored a penalty.
"I wanted to continue the adventure with the club who raised me. We must raise our heads because we have to do better."
Arsenal are still expected to offload at least one midfielder before Monday evening's transfer deadline, with Matteo Guendouzi and Lucas Torreira being linked with Hertha Berlin and Atletico Madrid respectively. body check tags ::