The Gunners host Blackburn in the fifth round of the FA Cup on Saturday in the first of a run of games which Wenger accepts will define their season as they aim to stay on course for a first trophy since 2005 and break back into the Barclays Premier League top four.
Bayern, runners-up to Chelsea in last season's Champions League final, are currently 15 points clear at the top of the Bundesliga - having not lost since October 28. Jupp Heynckes' men have returned from the winter break with four straight league wins.
However, Wenger has called upon his side to recapture the spirit of 2006 when despite inconsistent domestic form Arsenal went to Real Madrid and recorded a famous 1-0 victory before going on to reach the Champions League final.
"I believe we have a chance to beat them and we have to take it. We want to be at our best," said Wenger.
"When we went to Real Madrid a few years ago they had (Zinedine) Zidane, (David) Beckham, Raul, Guti and we beat them over there at Madrid.
"We were fourth or fifth in the league, so it is just down to us to believe we can do it.
"We know now it is the time when we can show how strong we are.
"I believe we are a stronger team than we were in October and November, but I can talk and talk - we must show it on the football pitch."
Despite the obvious draw of next week's prestigious European fixture, Wenger maintains his side will be fully focused to see off the challenge of Blackburn and secure safe passage into the last eight of the world's oldest knockout competition.
"They know there is an opportunity, if we go through we are in the quarter-final and they don't want to miss that," he said.
Arsenal's defence is likely to be tested by Jordan Rhodes, who has scored 20 league goals to keep Rovers in with a shot of the npower Championships play-offs despite another turbulent season behind the scenes at Ewood Park.
Wenger has been impressed by 23-year-old Scotland international, who started his career at Ipswich and joined Rovers in an £8million deal from Huddersfield last summer.
"He has scored 20 goals, so he must have something special and a big intelligence in the box, with a big level of anticipation and he is skilful finisher," said Wenger.
"You wonder now whether this boy at 18 or 19 had he gone to a big club what career he would have made?
"Maybe the fact that we had the money to only buy foreign, meant we forget a few people who could make it.
"You have players like (Grant) Holt and (Rickie) Lambert, people who when they come up to the Premier League they make it, have an impact but nobody bought them.
"They just came up there in the Premier League with their club and they showed that they had the level.
"Maybe there are a few missed as we do not pay too much attention to the lower leagues."
Wenger added: "Rhodes can prove himself, yes, but I hope not tomorrow [Saturday].
"Blackburn are still in contention for a play-off place and if you look at the names on their squad list, if they can get into the play-offs, then they will be a major threat as they have a lot of experienced players."