Manuel Pellegrini's side have won 10 of their 11 Etihad Stadium matches in all competitions this term - they lost 3-1 to Bayern Munich in the Champions League - and scored 44 goals.
And, heading into this weekend's clash buoyed by Tuesday's brilliant come-from-behind 3-2 triumph in the reverse fixture against the European champions, Milner is upbeat.
"They are top, playing very well and are full of confidence," the 27-year-old said. "But we have been performing very well at home.
"Hopefully we can keep that going and I'm sure if we perform like we have been at home, we will have every chance of getting the win."
Arsenal go into the game having also qualified for the last 16 of the Champions League, albeit after a 2-0 loss at Napoli on Wednesday.
"Saturday was on our mind, (but) we knew to come to Naples would be difficult," Gunners boss Arsene Wenger said.
"We have done our job, now we will give absolutely everything on Saturday morning."
Second-placed Liverpool travel to Tottenham on Sunday afternoon in another tasty looking encounter.
Reds boss Brendan Rodgers has issues to contend with in central midfield, with captain Steven Gerrard likely to be sidelined for up to six weeks with a hamstring injury and Jordan Henderson struggling with bruising on his right ankle.
Spurs have clawed their way back into the race for the top four recently following a draw against Manchester United and wins over Sunderland and Fulham.
The north London club also face Southampton and Manchester United again over the next few weeks, so need all their best players fit.
They will use blood-spinning technique PRP to try to get Jan Vertonghen back in quick time after he joined Vlad Chiriches and Younes Kaboul on the treatment table - but boss Andre Villas-Boas is sure he will have enough cover in central defence over the festive period.
"Etienne Capoue had an excellent performance against Sunderland, Vlad could be back on Sunday so we still have enough cover," the Portuguese said.
"In extreme situations we have Sandro and Kyle Walker, who have played in that position before too."
Third-spotted Chelsea will be looking to capitalise if the Gunners slip up in Manchester - Jose Mourinho's men host second-bottom Crystal Palace on Saturday afternoon.
The Blues secured top spot in Champions League Group E on Wednesday with a 1-0 defeat of Steaua Bucharest, and now turn their attention back to domestic matters and bidding to forget last weekend's loss at Stoke.
"We have to grow up, step by step, go now to two matches that are new matches for some of my players," Mourinho said of the knockout phase.
"The next stage is last 16, wait for the result of the draw, forget about the Champions League until 2014, February, March and let's work to improve the team and to get results in the English competitions.
"And when we get results in the English competitions we are preparing ourselves for the next stage of the Champions League."
Manchester United visit Aston Villa on Sunday with winger Ashley Young insisting the players have to take their fair share of responsibility for their recent poor form.
The Red Devils avoided the ignominy of a third successive home defeat - which has not occurred for 51 years - thanks to a 1-0 win over Shakhtar Donetsk on Tuesday which saw them finish top of Champions League Group A.
On Monday, manager David Moyes said he took "complete responsibility for the results". But, when asked whether the players felt responsibility should be shared, Young said: "Of course. We are the players who go out on the pitch.
"Everyone is in it together - manager, staff and players. We win together, we lose together."
Hull, who revealed on Wednesday that they had applied to the Football Association to change the playing name to Hull Tigers from next season, welcome Stoke to the KC Stadium on Saturday knowing victory would lift them back into the top half of the table.
Fulham striker Darren Bent has been training well this week and is in contention for the tricky trip to fifth-placed Everton, while seventh plays eighth at St James' Park when Newcastle tackle Southampton. In other games on Saturday, Cardiff face West Brom and West Ham take on Sunderland, while on Sunday Norwich do battle with Swansea.