"We're very honest," the actor, 40 – who is separated from wife Courteney Cox – told PEOPLE backstage after Monday night's Dancing with the Stars. "I'm very honest [with her] about myself and what I'm doing."
Arquette wasn't too forthcoming when it came to discussing his new leading lady – a correspondent for The Insider who was married to Girls Gone Wild creator Joe Francis – but he did say the relationship is in a good place.
"It's going well," he noted with a chuckle. "It's going well."
Still, it doesn't sound like McLarty will be spotted rooting for Arquette from inside the ballroom, where Cox and his daughter Coco, 7, have cheered from the sidelines every week.
Asked if McLarty would be attending any tapings, Arquette said simply, "She lives in New York."