The 23-year-old shortstop is hitting .194 with two home runs and 13 RBIs.
Brewers general manager David Stearns noted to reporters that Arcia has made "significant contributions to this club defensively," but the move was made to "get him out of the spotlight" of the major leagues and "get back to being a player who can contribute offensively."
The Brewers called up Arcia in August 2016 when he was the top prospect in the organization. He hit just .219 in 55 games that season, but in 2017 he hit .277 with 15 home runs and 53 RBIs.
Manager Craig Counsell told reporters that he believes the Brewers are best when Arcia is the shortstop, "but you've got to provide something on the offensive end." He added that Arcia has "shown he can do better" offensively and the team hopes the demotion gets "him back to that."
The Brewers called up infielder Eric Sogard from Colorado Springs in a corresponding move. He had previously been with the Brewers this season but was demoted after hitting just .100 in 60 at-bats.
In the other moves Friday, the Brewers acquired catcher Erik Kratz from the New York Yankees in exchange for a player to be named or cash, and designated catcher Jett Bandy, who was hitting .188, for assignment. The team also recalled right-hander Adrian Houser from Double-A Biloxi and sent Jorge Lopez to Triple-A.