City assistant coach Arteta, a former Gunners player, is reported to be one of the prime candidates to take over at the Emirates Stadium following the end of Arsene Wenger’s 22-year reign.
The 36-year-old began working with City after retiring from playing in 2016 and performed a key role in this season’s title success.
Guardiola, speaking after champions City beat Southampton to become the first club to accumulate 100 Premier League points, said he “wants the best” for his friend and colleague Arteta.
“What we have done this season, Mikel his contribution was outstanding, amazing, we work together so good,” said City boss Guardiola.
“If he stays I will be the happiest guy in the world and if he decides to move because he has this offer, this option, I will not say you do not have to go.
“I want the best for my friends and he’s a friend of mine.
“If he decides to go, I will be so sad but I will understand his decision because it’s his career, his life, his family, and I am not the right guy to say you don’t have to do that.
“But hopefully he can stay and finish what we started together in the upcoming years.”
While City ended the season with a 1-0 win at St Mary’s, Gunners boss Wenger signed off by beating Huddersfield by the same scoreline.
Juventus coach Massimiliano Allegri, former Chelsea boss Carlo Ancelotti and ex-Gunners captain Patrick Vieira are among the other names linked with replacing the long-serving Frenchman.
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