"We are in November. They won the FA Cup last season. The prestige of the club, the Emirates Stadium, of course they are a contender," Guardiola told reporters before the clash at the Etihad.
The Citizens sit five points clear of nearest rivals Manchester United at the top of the table, while Arsenal are currently sixth after losing just one of their last 13 matrches in all competitions.
"It is nine points. The difference [between Manchester City and Arsenal] is nothing, believe me," the Spanish manager continued, while also playing down talk about their impressive start to the season.
"People consider we are going to play like the last two months all season. When that has happens I can say, 'OK we have a big chance to be champions' but nobody can assure you that. We have to fight."
Guardiola also admitted they will have one eye on the game at Stamford Bridge, but their priorities lie in overcoming Arsenal at home. "We know United are playing against Chelsea," he said. "So it is another game to make more advances on one of them, or both of them. That is why we have to be focused on an important game for us."
"At the least maybe [we could] leave Arsenal 12 points behind. It is a massive game for us for many circumstances, starting from the way we want to play, to try to win the game," he reiterated.