Squillaci asked to be left out of the Sevilla side that faced Braga in the Champions League qualifier first leg on Wednesday night, so as not to be cup-tied for a potential deal with the Gunners.
The France defender's decision left Antonio Alvarez angry at the time, but the Sevilla coach now says the issue is water under the bridge.
"I didn't like the fact that he didn't want to play (against Braga), but the circumstances turned out that way," he said at a press conference on Friday.
"I wasn't going to lose a lot of time thinking about what could happen. I turned over a new page and forgot about the issue."
Squillaci's decision was reported to have caused unrest in the Sevilla dressing room before the Braga match, which the Spanish side lost 1-0 in Portugal, but Alvarez says those stories are false.
"Nothing happened," he said.
"I got the players together, told them that Squillaci wouldn't play and that (Federico) Fazio would start in his place.
"Then we spoke about the match, said that it was going to be difficult. But the team never gave in.