Arbeloa, 43, emerged as Fulham's primary target after Marco Silva left Craven Cottage to become Jose Mourinho's successor at Benfica. Advanced talks have covered the make-up of his backroom staff and first-team planning, and paperwork is understood to be at a late stage.
The Spaniard's only senior managerial experience came at Real Madrid, where he replaced compatriot and close friend Xabi Alonso in January after a dressing-room breakdown under the Basque coach. Arbeloa led Real Madrid to second place in La Liga but departed at the end of the season, with Mourinho returning to the Bernabeu for a second spell.
Alonso has since been appointed Chelsea manager, and the former Liverpool teammates could face each other on the opening weekend of the 2026-27 Premier League season when Fulham travel to Stamford Bridge on August 24.
Fulham had considered Kieran McKenna among other candidates, though his release clause from Ipswich — where he left to take a break from football — would have cost £7.5m.
That departure opened the door for O'Neil at Portman Road. Ipswich have been holding positive talks with the 43-year-old and his prospective employers at Strasbourg, both of whom sit within the BlueCo ownership structure that also controls Chelsea.
O'Neil joined Strasbourg in January 2026, replacing Rosenior after the Englishman moved to Chelsea, and led the club to eighth in Ligue 1 and the semi-finals of the UEFA Europa Conference League — becoming the first Englishman to steer a side to a European semi-final since Roy Hodgson with Fulham.
An announcement at Ipswich is anticipated within days. O'Neil would bring assistants Tim Jenkins and Neil Critchley with him to Portman Road.