"He understands the club's values and how important it is to give young players the opportunity to grow and develop," Arsenal academy manager Per Mertesacker told Arsenal's website.
"Everyone knows Freddie loves the club and we look forward to him developing his career with us."
Ljungberg played for Arsenal from 1998-2007 and made 216 appearances, scoring 46 goals. He was named the Premier League's player of the season in 2001-02.