The club's former midfielder was thought to be a frontrunner for the position following Arsene Wenger's resignation as manager.
However, reports have emerged claiming that the Arsenal board have selected former Paris Saint-Germain boss Emery as the Frenchman's successor.
Emery won five trophies, including the Ligue 1 title, during a two-year spell at Parc des Princes, but the club's failure to progress in the Champions League cost him his job.
Arteta has never before been a manager, but he has honed his coaching skills during a two-year stint as Pep Guardiola's assistant at Manchester City.
Following the latest reports, former Arsenal forward Nicholas told Sky Sports News: "Arteta was a risk because of his lack of experience, but what he learned from Pep in a few seasons is as good as what Emery will have learned at PSG.
"It's the experience that probably helps. Emery will be more natural in making and accepting the big decisions. Arteta would have come in and been a lot more forceful with what he wanted to do. Emery would come in and say 'where are we? who's going out? who's leaving? what's our situation in terms of buying?'.
"I think he makes a strong case for himself. Style is important to Arsenal, they want to keep the fabric that Wenger did build. This is a guy who understands the pressure of the situation too. At PSG he won the domestic trophies, it can be taken for granted, but the pressure to win is huge.
"It gives him an edge, not a dramatic edge, but every manager is a risk. There is no guarantee Arsenal will challenge for the title or the top four, but Emery's experience does give you a slight advantage."
Emery also succeeded with Sevilla, winning three Europa League titles between 2013 and 2016.