If your record is otherwise clean, the interviewing officer can exercise discretion to find that you otherwise have good moral character. There is no guarantee, so you should be ready to discuss how your actions did not fit the elements of the domestic violence statute under which you were arrested.
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You may be able to establish good moral character despite the arrest. An arrest does not necessarily bar a person from establishing good moral character especially when the case was not prosecuted. However, you need to be prepared to answer questions about what happen. An admission to committing the crime is treated the same as if you were convicted. I would encourage you to retain an attorney to represent you in this matter.
It is highly unlikely that it will affect your N-400 since no charges were filed but, at your interview the officer may still ask you about the domestic violence incident. Just be prepared to explain if that happens.