Balugon, 19, has been linked with a move away from the Emirates, with the academy graduate’s current deal set to expire at the end of the 2020/21 season.
While Balogun is yet to put pen to paper, Arteta wants the forward to commit his future to the Gunners - and has named him in Arsenal’s Europa League squad to face Molde on Thursday
Speaking ahead of Thursday’s match in Norway, Arteta told reporters: "Yes, he is a player that I want.
"He is a player that I want to stay at the club. I love working with young players.
"You can see the talent is there, the ambition is there and he can fit with our structure and progress in the future.
"He's part of the DNA and myself and the club are working to try to extend his contract.
“We're trying to change the situation that we are in at the moment with him, and trying to convince him that this is the right place for him.”
Competition for attacking roles in Arteta’s squad is fierce despite a lack of goals this season.
When asked what had changed in Arsenal’s thinking regarding Balogun, Arteta said: "I have decided that I want to keep the player.
"The moment that I started to see more of the player and change certain things that I didn't agree with, we decided to give it a go, tried to convince the player, try to show him what we want to do with him, why he fits in with what we are trying to do at the club.
"The young talent and the top talent that we produce at the academy is with the final aim to put them in the first team.
"When I signed for this club it was one of the things that excited me the most because I love to work with them and it's part of our DNA and the history of the club.
“When we have them, let's keep them and we really think they are players that can take us to the next level.”