Guendouzi has been one of the players Arsenal were keen to move on this summer after his relationship with head coach Mikel Arteta had deteriorated.
"The talks with those in charge convinced me," Guendouzi said. "I not only want to continue my development, but also help the club make the next step. I am just up for Hertha and Berlin!"
Hertha sporting executive Michael Preetz added: "In Matteo we'll get a player who might be young in years but who'll make us more versatile in midfield with his experience of nearly 60 Premier League matches. He'll introduce new aspects which will improve our game."
The one you've all been waiting for ⏳— Hertha Berlin (@HerthaBSC_EN) October 5, 2020
Welcome to the club, @MatteoGuendouzi! 🤩
The French midfielder signs for Hertha on a season-long loan from @Arsenal 🦕#DeadlineDay #HaHoHe pic.twitter.com/9NlcuR7aeV
The 21-year-old has not featured for Arsenal since the side lost 2-1 to Brighton in June and hasn't been included in any match day squads since the beginning of the 2020-21 season.
During the game, Guendouzi grabbed Brighton striker Neal Maupay by the neck after full-time. An internal disciplinary meeting was held and the Football Association investigated the incident but no charges were brought.
Earlier on Monday, sources told ESPN that Arsenal are working on securing a deal to sign Atletico Madrid's Thomas Partey after indicating they are willing to pay the midfielder's £45 million release clause.
The Gunners have retained an interest in the 27-year-old throughout the summer but Atletico refused to budge from their valuation with Arsenal struggling to finance the deal as they sought to trim a bloated squad.