Arsenal have lost their grip on the title race after securing draws in their last three games, which has left them only five points above reigning champions City, having played two more games than Pep Guardiola's side.
City, on the other hand, have been in solid form churning out victories as they aim for an elusive treble after booking their spot in the FA Cup final and Champions League semi-finals.
Arsenal travel to City on Wednesday, hoping to regain their control in the title race as they look for their first Premier League trophy since 2003-04.
"We knew from the beginning, City and Liverpool were the teams to beat," Arteta told reporters. "(For) what they have done for the last six or seven years, they fully deserve credit.
"We wanted to close the gap as much as we possibly could, now we are toe-to-toe.
"We knew we had to go to Etihad and after that we are going to have five very difficult games. So that game (on Wednesday) is going to be really important. Is it going to define this season? The answer is no."
Arsenal have lost their last seven meetings with City in all competitions and have not won at City in the league since 2015 but Arteta said he has "100%" belief in his team to put up a fight against them.
"I look at how the players reacted (after the last game), they defend each other in every moment. We really want it and we are again going to show it tomorrow night," Arteta added.
"But you have to deliver in the right moment, the right performance. It has to be perfect because that is what is demanded at this time (in the season)."
Asked if the clash will be 'winner-takes-all', Arteta said: "No, if we win tomorrow we have not won the league. It will shift probably the percentage, but five games in this league is very tricky still."
Arsenal are still waiting to hear about the fitness of William Saliba (lower back) while Granit Xhaka (illness) is also doubtful.
"No real improvement, we are still waiting, still hopeful, but another week gone by and he was not able to train with the team," Arteta said.
Asked if defender Saliba would be available for Wednesday's trip to the Etihad, Arteta added: "I'll leave that to the doctors. We are preparing for this game without him, we have to go week by week."
NO ONE COMPARES TO HAALAND
Erling Haaland's (22) incredible goal record at Manchester City sets him apart from all other players this season, Arteta said.
Haaland leads the league's goal-scoring charts with 32 goals, eight more than Tottenham Hotspur's Harry Kane in second and 12 more than Brentford's Ivan Toney, who is third on the list.
The Norway international is only one short of breaking Liverpool forward Mohamed Salah's record for the most goals scored in a 38-game Premier League season.
His total haul this campaign stands at 48 goals in 42 games across all competitions for City, including 12 in the Champions League.
"When you look at the numbers, there is no comparison with anybody else," Arteta told reporters. "He (Haaland) is able to produce that as well because the setup is done in the right way for him.
"Even with him they have the capacity to play in a different way."
Asked how Arsenal are planning to silence Haaland and curtail City, Arteta replied: "We are working on their threats as well as on their weaknesses, we know where they are. City start from the keeper, he is a threat with the ball.
"They can do various things, so many things that you have to adapt to, so you have to focus on certain principles."
