Emery told Xhaka he was no longer part of the Gunners" leadership group and said the Switzerland global "accepted' the decision.
Emery admitted that he informed Xhaka of his decision to remove him from his "leadership group" and replace him with Pierre-Emerick Aubameyang as captain on Tuesday morning, and now it looks like his Arsenal career is over.
The Gunners were looking to return to winning ways after a hard week for Emery and his Arsenal squad in the Premier League and the Carabao Cup.
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"I have spoken to Granit and he is no longer one of the captains in the group", Emery said at a news conference to preview Wednesday's game.
Emery explained, "We have a match tomorrow, a very important match for us in the Europa League and then on Saturday in that way we need to take some decisions about some circumstances that are happening".
Xhaka held the reigns of Arsenal earlier in this September after Emery took a vote of all the Arsenal footballers in the dressing room and majority came in Xhaka's favour.
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"People have said things like "We will break your legs", "Kill your wife" and "Wish that your daughter gets cancer".
In response, Emery held a ballot among his players which saw Xhaka top the poll. When you look around the Arsenal XI, only Aubameyang and Guendouzi truly lead by example, and it's no coincidence that the 2 of them have been by far Arsenal's best players this season, and single-handedly won them a few matches from losing positions. I decided that and I told him this morning.
"The decision I took I told him and I told the other captains and now it's continuing", he replied having been asked three times about if Xhaka had played his last game for Arsenal. Hector Bellerin, Alexandre Lacazette and Mesut Ozil are named as his deputies.
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"They are the four (remaining captains) we selected and the first now is Aubameyang". My focus is for tomorrow.