Arteta hails from the city of San Sebastian in the Basque region, but has played in England since joining Everton in 2005.
Arteta's form for the Toffees saw him touted as a possibility for Capello's squad in 2010, having not previously represented Spain at senior level.
The 29-year-old considered an England call-up but the decision was taken out of his hands upon closer examination of FIFA rules.
"If it was any other country I would have had to say no, but because it was that one I said I would have to think about it," he told the club's official website, www.arsenal.com.
"England has been really good to me professionally and personally. In the end I didn't have to make a decision because I wasn't allowed to play because of FIFA rules.
"At least it was nice to know that Fabio Capello and his staff were thinking about bringing me into the national team. I feel English in some ways because I have spent the biggest part of my career here.
"Obviously I know how English people think, what they do, the culture - I know everything. I have to adapt to that so I am living life like an English person.
"It's funny, I look at my child and hear her talk English, it's amazing."
Arteta began his career as a trainee with Barcelona before a loan move to Paris Saint-Germain and spells with Rangers and Real Sociedad.
He left his hometown club for Everton in 2005 and admits childhood friend Xabi Alonso - then with Liverpool - helped sway his decision.
"We used to live five minutes away from each other and play at the same clubs when we were young," Arteta said of the Real Madrid midfielder.
"We had a good relationship but then I went to Barcelona and he stayed. Then suddenly, five years later he went to Liverpool and I went to Everton and we lived next door to each other.
"It was crazy but that's what football brings you sometimes. You never know where you are going to end up.
"Obviously I spoke to him and he said Liverpool was a really nice city to live in, that the fans were unbelievable, there was a big rivalry between the two clubs and it was a good experience.
"I didn't have any doubts about moving there and that was partly thanks to him."