They have made a solid start to the season, but currently sit outside the Premier League’s top four and in fifth place.
Chelsea have been tipped as title contenders by many, although their manager Frank Lampard has urged people to stay grounded.
Arsenal, who face Chelsea on Boxing Day, beat the Blues in August to win the FA Cup, however since then they have spent big and Arteta believes they’ve the best squad in the League now.
“Obviously Chelsea always have a great squad of great players,” he said.
“The team that we faced a few months ago was a top one. In this moment, you’re probably talking about the strongest squad in the Premier League.
“They’re doing a really good job, Frank is doing a really good job.
“He’s got a team full of belief and confidence, and even though they had some defeats, they got back to winning on Monday and it’s a team that is going to be fighting for the top spot in the league for sure.”
Unlike Chelsea, Arsenal are on a miserable run of form and they have not won a Premier League match since November.
They head into their Boxing Day game with the Blues sat 15th in the table, four points above the relegation places, and pressure is mounting on Arteta.
“The best medicine when you are in this situation is to win a football match,” Arteta said.
“Every defeat is another hurting moment, another moment of disappointment, another moment you have to lift yourself up and that’s what we've got to do.
“I think the medicine for all of us would be to come here against Chelsea, beat them and then move from there. It’s exactly what we all need.”