Arzani joined City in the summer of 2018 from sister club Melbourne City after representing Australia in the World Cup in Russia.
The 21-year-old was immediately sent out on a two-year loan spell to Scottish giants Celtic but suffered a serious ACL injury in just his first game which ruled him out of action for over a year.
“Daniel is a fast, manoeuvrable winger who can play on both the left and the right. He plays with a lot of guts and has power in his actions, which suits our club and supporters," Utrecht technical director Jordy Zuidam said.
“We've followed Daniel since his time at Melbourne City, where he made his first team debut at the age of 17. He seemed unattainable for us for a long time, but we were finally able to strike this transfer period.
"I am happy that he is now finally here in Stadium Galgenwaard to put a scribble under the lease. We look forward to seeing him in the FC Utrecht shirt in the anniversary season."