Toral is yet to play for the Gunners but impressed on a season-long loan with Championship side Birmingham City last season.
The Spaniard played 38 games for Birmingham, scoring eight goals. He also spent the 2014-15 season on loan at Brentford where he played 37 times and scored six goals.
The 21-year-old will now be given a chance to prove himself against some of the best teams in the world as Granada look to improve on their 16th place finish of last season.