Borussia Dortmund's move for Nwaneri was accelerated by injury elsewhere in their attack.
New signing Giannis Konstantelias, who joined from PAOK over the summer and had scored on his Bundesliga debut, ruptured his anterior cruciate ligament during Saturday's 2-0 win over Hamburg and will be sidelined for the majority of the season.
With Dortmund having already tried and failed to sign Nwaneri last summer, they moved quickly once the extent of Konstantelias's injury became clear.
The loan will run for the full season, with Dortmund covering Nwaneri's wages in full, and BBC Sport had revealed earlier this month that Arsenal would prioritise loan offers for the 19-year-old rather than sell him outright.
That reluctance to part with him permanently reflects the esteem in which he is held at Emirates Stadium, even after interest from RB Leipzig, Napoli and Lyon during the window, among other clubs across Europe.
Nwaneri had initially hoped to fight for a regular place in Mikel Arteta's squad this season rather than depart on another loan, but limited game time — he was an unused substitute in Arsenal's opening-day win over Coventry City and was then omitted entirely from the squad to face Aston Villa — left him short of the minutes he was looking for.
With Arteta's forward and attacking-midfield options unusually deep this season, there is a broad sense at the club that regular football elsewhere will benefit his development more than a place on the bench.
The academy graduate has made 51 first-team appearances for Arsenal since breaking through as a teenager, becoming the youngest player in Premier League history when he debuted at 15 years, five months and 28 days old in September 2022. He has scored 10 goals and set up two more, and spent the second half of last season on loan at Ligue 1 side Marseille, gaining experience of regular senior football away from the intense competition for places at Arsenal.
He remains under contract at Arsenal until 2030, giving the club a clear long-term stake in how his development at Dortmund unfolds under head coach Niko Kovac.