The Gunners were down to 10 men for the entirety of the second half, as Leandro Trossard received a red card just before the end of the first half for kicking the ball away while already on a yellow card.
Undeterred, they came agonisingly close to holding on to the 2-1 lead given to them before the break from Riccardo Calafiori and Gabriel Magalhaes but John Stones levelled at the death for City.
Arsenal would have gone top of the table with a first league win at the Etihad Stadium since 2015 and it would have been a huge statement in this season’s title race.
As it stands, City remain top on 13 points, ahead of Liverpool and Aston Villa – who both have 12 – and Arsenal (11).
Arteta, though, said he was still proud of his team’s resilience in the face of adversity.
“They put their heart and soul into every single action and at the end to be punished in the last minute, it was the 99th, they are gutted,” he said.
“But as well, they know that they have made another big step today as a team and individuals to be able to do what they’ve done today here. We were given a context to the game that made it almost impossible for 56 minutes, but we adapted to that context in the best possible way.
“The way the team competed was unbelievable.”
Arteta steered away from commenting on Trossard’s second yellow card, but said that “99 out of 100 times you play 56 minutes in this stadium 10 against 11 you are going to lose and lose by a lot of goals”.
“It’s unbelievable how they react but I cannot be happy because I want to be in a situation where we can enjoy the game,” he added.
Arsenal had dropped two points in a 1-1 draw with Brighton & Hove Albion just three weeks ago after Declan Rice was sent off for also kicking the ball away and they suffered a similar fate in heartbreaking fashion.
Against City, they did well to bounce back after Erling Haaland’s 100th goal for the club had fired Pep Guardiola’s men into an early lead.