The 23-year-old Bosnia-Herzegovina global, who has played with the Bundesliga side for six years, will join on a free transfer and become an Arsenal player when the transfer window opens on 1 July.
Gunners manager Arsene Wenger hopes the 23-year-old is the first piece in building a squad capable of sustaining a genuine title bid.
The Bosnia and Herzegovina global will arrive on a free transfer on July 1, when his contract at Bundesliga outfit Schalke expires.
The Bosnia and Herzegovina worldwide, who can play at left back, centre back and midfield, emerged as a key player for Schalke in recent seasons, featuring for the club in the Champions League and Europa League.
Kolasinac has definitely made a name for himself in the Bundesliga last season but the things didn't get off to the best possible start for him.
He leaves the German club after six years at the Veltins-Arena.
His attacking play will need further improvement if he's going to play as a wing-back. I am really flexible, ' he told Arsenal's official site.
He continued: 'I think my main strength is my mentality.
Kolasinac is expected to compete with Nacho Monreal for the starting left-back spot, a position that was fairly fruitful last season.
It plays into the hands of interested club Newcastle United, who have been linked with week by The Sun with a swoop for the defender who was fleetingly an England global.