The Gunners appeared poised to haul themselves firmly back into the title race as they led relegation-threatened Latics 2-0 at the DW Stadium with just over 10 minutes remaining.
Wigan, though, proceeded to conjure an astonishing comeback, and with it the most stunning victory in their Premier League history.
Ben Watson first sidefooted the Latics back into contention in the 80th minute, followed in the 89th by a howler from goalkeeper Lukasz Fabianski on his 25th birthday.
The Pole fumbled Charles N'Zogbia's corner, allowing Titus Bramble to nod home the equaliser, despite Samri Nasri's attempt to clear the ball off the line.
Then in the first of four minutes of injury time N'Zogbia struck a stunning winner to leave Wenger to describe the loss as the most disappointing of the season.
"I believe we were not focused, not disciplined and were caught," said Wenger.
"In football you have to stay focused for 90 minutes otherwise you run the risk of being punished.
"That is especially the case against a team with nothing to lose, fighting not to go down. You knew they would not give up, and in the end we were punished for that.
"Even at 2-0 I never thought the game was over. I could see we were having difficulties keeping the ball, creating other chances, and when you do not create chances in football you are in trouble.
"After going 2-0 up our game lacked cohesion and discipline, and I always felt we could be punished."
Wenger refused to divulge what he told his players after the loss, one which leaves them six points adrift of leaders Chelsea and with only nine to play for.
Rather than being in the title hunt, Wenger is now looking over his shoulder at Spurs and Manchester City, with the hope now of simply hanging onto third place.
"My target is to win the next game, that's all we can do," added Wenger.
"Manchester City and Spurs can still catch us, so we have to win at least one of our remaining games."
Cheekily asked as to who his money was now on for the title, Wenger gave a naturally dismissive response.
"I don't mind and I don't care," said Wenger.
"All I know is if we had won today then we would have been back in it."
It is a result that leaves Wigan on the brink of safety as they are seven points clear of the relegation zone.
After losing eight and drawing one of their previous nine league meetings with Arsenal, this was a remarkable debut top-flight win over the Gunners, adding to victories earlier this season against Chelsea and Liverpool.
"We finally got the rewards our performance deserved," said manager Roberto Martinez.
"We started the game well, played face-to-face with Arsenal, but then we began to lose the ball cheaply and the game was going away from us.
"Not many teams come back from 2-0 down against Arsenal, and the reason is the effort and belief the players showed today.
"Moments like this are vital for our club, are the reason why we are involved in football and what our fans deserved.
"To beat Chelsea, Liverpool and Arsenal in one season is something that doesn't come by accident, and I'm extremely proud of the players."
Skipper Mario Melchiot hailed Martinez's wise words at the break as the reason for the revival.
"At half-time the gaffer said 'Keep going guys, I believe in you and you can do it', and that made a difference," said Melchiot.
Asked what the win would do for the club, he added: "It's very big.
"It's going to make a lot of difference to the morale of the team and those who come and see us."