The 27-year-old, who started only five times for the Gunners last season, does not have a buyout clause in the contract for the whole season.
Pepe arrived at the north London club in 2019 for a club-record £72 million transfer from Lille, but he has yet to make an impact in the Premier League.
The club said, “Everyone at Arsenal wishes Nico luck in France with Nice next season.”
The 2024-bound Ivorian did not participate in either of Arsenal’s opening Premier League games this year. However, in 112 matches in all competitions, he has scored 27 goals.
Before their Thursday night Europa Conference League match against Maccabi Tel Aviv, he was presented to the Nice fans.
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This transfer window has seen Arsenal manager Mikel Arteta add offensive players Gabriel Jesus, Fabio Vieira, and young Brazilian Marquinhos to his team.
Additionally, there have been rumors that Arsenal is interested in signing Wolves winger Pedro Neto.
