Hakan Calhanoglu struck Inter's winner from the spot after a penalty was awarded for hand-ball against Mikel Merino.
Arteta said afterwards: "The worst thing of the night for sure is the result because the dominance, the attitude and the performance we showed against one of the best teams in Europe in this stadium I haven’t seen it in all the games that I watched.
"The reality though is the result and we had many situations in front of goal that we could have resolved better enough to score at least two goals.
"Extremely frustrated as well because there are then two decisions that marked the course of the game."
On the penalty, he added: "I don’t understand. There is no danger at all. You cannot react because the ball is very close. But OK. They decide that is a penalty. But if that is a penalty then the one on Mikel Merino where he punches him in the head has to be a penalty 100%. These are the margins in this game and it’s very difficult to accept."