The Gunners could not get back to the game after a Raheem Sterling header put Manchester City ahead in the opening two minutes and that was enough to extend Pep Guardiola’s winning streak to 18 games.
Speaking to the media after the game, Arteta said his men could not read the game well.
“When we conceded the first goal it put us in a difficult situation. It was tough. With the formation and the players they use they are really comfortable,” the Spanish coach said.
“After that the team reacted really well, we were on top of the game and created chances but we lacked the quality in those situations to score the goal.
"We got something wrong. We didn't do it in the first 10 minutes. It's a cross and Raheem Sterling cannot head a ball there.
“You cannot concede that goal. It was a tactical thing that we were prepared for but we didn't read it in the game.
"We got momemtum and confidence and were really good on the ball as well. We found good spaces but when we were in the final third we didn't pick the right pass to score a goal.
“We tried to use some weaknesses that we thought we could exploit. They don't have many! How they compete when they have in the last few minutes, they are a top side.
"They played a little bit differently but within that organisation they can do lots of really good things. They manage the situation really well.
Next up for Arsenal is a game in the Europa League on Thursday against Benfica.
He added: “We have a final on Thursday because we want to continue in the competition [Europa League]. We have to sleep, eat and we won't have time to train then we fly to Greece."
