The myth of her transformation begins in Arcadia when she came across a clear stream and began bathing, not knowing it was the river god Alpheus, who flowed down from Arcadia through Elis to the sea. He fell in love during their encounter, but she fled after discovering his presence and intentions, as she wished to remain a chaste attendant of Artemis. After a long chase, she prayed to her goddess to ask for protection. Artemis hid her in a cloud, but Alpheus was persistent. She began to perspire profusely from fear, and soon transformed into a stream. Artemis then broke the ground allowing Arethusa another attempt to flee. Her stream traveled under the sea to the island of Ortygia, but Alpheus flowed through the sea to reach her and mingle with her waters. Virgil augurs for Arethusa a salt-free passage beneath the sea on the condition that, before departing, she grant him songs about troubled loves, not those in her own future, but those of Virgil's friend and contemporary, the poet Cornelius Gallus, whom Virgil imagines dying from unrequited love beneath the famous mountains of Arcadia, Maenalus and Lycaeus.
During Demeter's search for her daughter Persephone, Arethusa entreated Demeter to discontinue her punishment of Sicily for her daughter's disappearance. She told the goddess that while traveling in her stream below the earth, she saw her daughter looking sad as the queen of Hades.
The Roman writer Ovid called Arethusa by the name "Alpheias", because her stream was believed to have a subterranean communication with the river Alpheius, in Peloponnesus.