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Arteta is isolating and will not be in the dugout at Emirates Stadium on New Year’s Day.
An Arsenal statement said: “Mikel Arteta will miss our match against Manchester City on New Year’s Day after testing positive for Covid-19.
“Mikel is isolating in line with Government guidelines and we wish him well.”
Arteta also contracted Covid in March 2020 which, along with a positive test for Chelsea player Callum Hudson-Odoi the same night, prompted the shutdown of football at the start of the pandemic.
After playing City, Arsenal are due to take on Liverpool in the first leg of their Carabao Cup semi-final on January 6.
Arsenal have shot up the table in recent weeks and sit fourth in the Premier League.
The Gunners thrashed Norwich 5-0 at Carrow Road on Boxing Day and have won four games in a row in the Premier League.
Their game against Wolves on December 28 was postponed due to a Covid outbreak in the Wolves squad.
The match against leaders City will be a significant test of their recent progress.
Arsenal are yet to confirm who will lead the team in Arteta’s absence.