Gabriel Martinelli provided the breakthrough on an evening that saw two title rivals exchange tense blows in a fascinating battle in north London.
Match Report
Gabriel Martinelli stepped off the bench and slammed in a late winner for the hosts as they beat their Premier League title rivals 1-0 at a jubilant Emirates Stadium.
The victory was Arsenal's first over City in the Premier League since December 2015 after losing the previous 12 and gave Arteta a maiden win over his former mentor Pep Guardiola.
"I'm so proud. It was the moment with the right people and the right players. We knew we would have to suffer and we did that. You need a big performance and the crowd too. It feels like a big win," Arteta told Sky Sports.
"I think the way we started we conceded the corner and then we gained some control and in the second half we started really good. We were there and really aggressive. The changes helped as well. The quality they produced in the goal was top.
"City give you a lot of problems and we gave them a lot of issues as well. It is not easy to get out. You need the right timing, the right movement, the right moments. I like the courage.
"You are going to have these hard moments against this team. You have to be direct and manage the emotions and make sure you don't get caught against this team."
Arsenal will see the result as justice delivered after Mateo Kovacic somehow avoided a red card in the first half. He was shown a yellow card for a tackle which saw his studs collide with Martin Odegaard's ankle and then received no further punishment for a similar foul on Declan Rice six minutes later.
On the incident, Arteta said: "I have seen the action but it is in the past and luckily we won."
Martinelli: Beating City gives us more confidence
Match-winner Gabriel Martinelli told Sky Sports: "I am not the man. I think everyone has a part in this victory. I scored the goal but it was the whole team and the staff and everyone. I am happy and the team is too.
"After my injury, I just tried to give my best to my recovery and try to be ready for the next game. Luckily it was for this game and I helped the team. I am happy with my goal and fitness.
"It gives more confidence to us. We know our potential and how tough it is to play against them. We beat them and it gives us more confidence to kick on."
Arsenal forward Gabriel Jesus added: "For sure it is a big win. Everyone knows how hard it is to play against them. But it is not impossible to beat them.
"You have to congratulate them on how they worked or played, but it is our home. We had to run, fight, be efficient and score goals. I am happy for Gabi that he comes on and scores. That shows how strong our team is."
Guardiola: Man City will bounce back
Arsenal go into the international break level on points with neighbours Tottenham at the top of the Premier League table.
As for City, they are just two points back but consecutive league defeats for the first time in five years suggests the treble holders may be more vulnerable than in previous campaigns.
City had just four shots at the Emirates, the fewest shots a Guardiola side has had in a top-flight game since April 2010 with Barcelona against Espanyol.
"We started really well with two or three chances. They started the second half really well with the rhythm. It was tight and they got a deflection goal. They won, congratulations to them," Guardiola told Sky Sports.
"We tried. We did it. I think from both sides there were not a lot of chances. I think both teams did good high pressing. It was tight and in the end, one action, we lost the game.
"Ten minutes was like that [Arsenal on top] and after it was equal. We had also our moments but in general, it was a tight game. Unfortunately, they did it.
"Now we have two defeats in a row and then we have the internationals. Hopefully, they come back fit and then we go again. Maybe it is a little bit better to be there and see what we have to do to catch them and then we will when we come back.
"It has happened. In Wolves it was a difficult game. Congratulations to Arsenal. We know exactly what we have to do and we do it."
On whether the absence of Rodri, who was serving the final match of his domestic suspension, was a factor in the defeat, Guardiola added: "That is a stat we cannot deny. But we put players to control more passes but Arsenal are aggressive in these areas. We will come back and continue. We will move forward."
Silva: Setback won't define City
Manchester City midfielder Bernardo Silva told Sky Sports: "It's a setback but it's still the beginning. We're far away from the end of the season. Obviously, it's not the result we wanted to get here but against a tough opponent at the Emirates it's never easy to play.
"It's a tough game for us, especially because of the outcome. I don't think we played that bad but yeah, a slip-up.
"There have been some results we weren't expecting, that we didn't want to happen but for example last season when we won the treble there were moments when nothing was going our way. You have these moments. It's the way you overcome them that defines the team."
What's next for Arsenal and Man City?
Arsenal face Chelsea at Stamford Bridge in the Premier League on Saturday October 21 after the international break, live on Sky Sports Premier League from 5pm; kick-off 5.30pm.
Manchester City host Brighton in the league on the same day; kick-off 3pm.
Match Events
0' The match is about to start!
4' MISS! Ake's shot over the bar
26' CHANCE! Nketiah's shot wide out
28' Yellow Card! Kovacic booked
50' CHANCE! Martinelli's shot saved
84' Jesus goes down in the box but ref says no penalty!
86' GOAL! Arsenal 1-0 Man City (Martinelli)
Line-ups
Arsenal XI: Trossard, Jorginho, Zinchenko, David Raya, Martin Ødegaard, Jesus, Rice, Gabriel, Ben White, Nketiah, William Saliba
Subs: Partey, Tomiyasu, Nelson, Havertz, Ramsdale, Smith Rowe, Martinelli, Jakub Kiwior, Fábio Vieira
Man City XI: Walker, Kovacic, Ake, Ederson, Ruben Dias, Bernardo, Haaland, Foden, Julián Álvarez, Josko Gvardiol, Rico Lewis
Subs: Stefan Ortega, Stones, Grealish, Akanji, Kalvin Phillips, Sergio Gómez, Matheus Nunes, Jérémy Doku, Oscar Bobb
SouthForK50
978
After WOLVES DEVOURED the CITY ARSENAL came with GUNS blazing and FED ON CRUMBS LEFT by the wolves ❤️
Nkmbrd
932
Ones upon a time, yet again
dougiefresh
750
Haaland with his parents, nice and quiet😝😝😝
Elly_trueboy
681
Man City without Kdb & Rodri is Just Granada 💀
sadik2
665
martinelli tonight
Bless_Brian
643
Arsenal just won their first trophy of the season 🏆
Toxin-Dc
631
put respect too his name pep can't forget this guy name as from now on
ochudojnr
560
Arsenal to all Manchester teams dis season
Ayjazz1997
525
Beating two brothers to weep is not meant for anyone except Arsenal
FootballBarbie
511
6 years later
DrLo_le
502
The Elephant 🐘 is doing again
ClemJay
483
No Arsenal fan will pass without liking this. Indeed we made a great buy
Dearjust
472
You can find every gif of nice goals here: http://www.goalgif.xyz/v2/live/matchGifs?match_id=53615169&language=en
Pikin90
464
What is Haaland doing this season ....
NelsonOpara
411
Man City Player today when they want to face Arsenal, because of the all time head to head.... 😄😄😄😄
Bless_Brian
129
The table Arsenal is climbing 😂