The shot-stopper was edging closer to leaving the Emirates Stadium on a season-long loan move with Turkish top flight side Altay his destination.
Runarsson has fallen down the pecking order at the club with the Gunners looking for a new goalkeeper to deputise for club number 1 Bernd Leno and starlet Arthur Okonkwo expected to be promoted to third choice.
However, the Iceland international’s move to Turkey in a bid to play regular first team football fell through as Altay and Arsenal failed in agreeing terms on his loan fee.
The 26-year-old joined Arsenal from Dijon last summer but lost his place as the number 2 when the club roped in Mat Ryan on loan.
Runarsson is not part of coach Mikel Arteta’s plans at Arsenal for the upcoming season, and they were looking to ship him off on loan.
It remains to be seen what decision Arsenal will take over Runarsson’s immediate future having seen his loan move collapse.
The shot-stopper’s current contract in north London runs through until the summer of 2024.