City could have moved ahead of Chelsea at the top of the table on goal difference after the Blues suffered a shock 1-0 defeat at Crystal Palace on Saturday afternoon.
However, despite taking an early lead in the late kick-off at the Emirates Stadium through David Silva, it was the Gunners - thumped 6-0 by Chelsea last weekend - who raised their game to draw level in the second half through Mathieu Flamini, and indeed only a fine reaction save from England goalkeeper Joe Hart on the hour denied Lukas Podolski what could well have proved the winner.
Liverpool can take advantage if they beat Tottenham at Anfield on Sunday to go two points ahead of Chelsea. However, City still hold two matches in hand on their rivals, although both they and Jose Mourinho's side also have to travel to Merseyside.
Nevertheless, Pellegrini knows the formula for success remains simple.
"The most important thing is that we depend on ourselves until the end of the season," said Pellegrini, whose side had won 3-0 at Manchester United in midweek.
"I see it exactly the way I saw it at the beginning of the season - I said it would be a close league with three or four teams fighting for the title.
"It was not a chance to go top because we could have won and then Liverpool could have won on Sunday and gone top. They were two points ahead of us going into the game, now just one.
"Arsenal still have a chance to fight for the title - we will see which team does things better from now until the end."
Midfielder Jesus Navas insists the City players remain confident.
The Spaniard said to City TV: "The team is working really well, we are in a good position and we have matches in hand as well, so we are very positive."
Wenger, meanwhile, has seen the character of his side questioned once again following the thrashing at Stamford Bridge, which ruined his 1,000th match in charge.
However, the Gunners boss insists it is far from all doom and gloom around the Emirates Stadium after finally getting the required performance from his team against a top-four rival.
"Since the start of the season this team has shown a lot of spirit," said Wenger, whose men were held to a frustrating 2-2 draw at home by Swansea on Tuesday night following a bizarre last-minute own goal from Flamini.
"We just went out (of the Champions League) against Bayern with 10 men, that we are in the semi-final of the FA Cup and that we are still are fighting at the top in the Premier League, so we are not as bad as everybody thinks because we have shown remarkable consistency.
"Tottenham, Liverpool and Everton aren't in the FA Cup so that means this team has shown quality and we have some players out.
"I would like to see Manchester City (against us) without (Vincent) Kompany, without Yaya Toure and without (David) Silva and go into a game of that stature, so we have been a bit unlucky as well."
Arsenal midfielder Mikel Arteta believes the players have given themselves renewed confidence for the challenges ahead.
"It means a lot (in terms of self belief) after two disappointing results in a row," said the Spaniard.
"Mentally someone has to put it right and only we (players) could do that.
"Hopefully we can finish the season strong because there is still a lot to play for."