Wenger’s team lost their 100 percent record in Group F as Robert Lewandowski’s late winner stunned the Gunners and ended their 12-match unbeaten run in all competitions.
Henrikh Mkhitaryan had put Dortmund ahead early in the first half and, although Olivier Giroud equalised before the interval, Wenger conceded Arsenal had been below their best both physically and mentally.
The Arsenal boss suggested a combination of fatigue and naivety had undone his team and he knows they face a tough road to the last 16.
Next up for Arsenal is a daunting trip to Dortmund on November 6 before a home clash with Marseille and then the final group fixture in Napoli in December.
“The group is tight and difficult for us but it (qualification) is still possible,” Wenger said.
“We have three teams with six points and we have played twice at home so we need a result away, but we can do that.
“Physically Dortmund were a stronger team than any we have played so far this season.
“But disappointment like that is part of a team’s development and growth. It is down to us to recover physically.”
Wenger felt the turning point of a tightly contested tie came when Swedish referee Jonas Eriksson opted to book Lewandowski rather than show the Pole a red card when he caught Laurent Koscielny with an elbow before his decisive 82nd minute goal.
“It looked like that,” Wenger said when asked if Lewandowski should have been sent off.
“But the referee was in a much better position than I was and he didn’t decide to do it. I will have to look again.”
With Arsenal’s German playmaker Mesut Ozil tightly marked by Dortmund’s tenacious midfielders, Wenger needed a vibrant performance from Jack Wilshere.
But the England international was a subdued figure as Wenger once again deployed him out of position in a wide attacking role before substituting him once he suffered an ankle injury.
“You could see he was not completely himself, that’s why I took him off,” Wenger said.
“He looked handicapped after the first tackle.
“He landed awkwardly and after that he limped a little bit. We will see how he responds in the next two or three days and wait for the medical assessment.”
Meanwhile, Dortmund manager Jurgen Klopp was happy to acknowledge his team’s victory was a smash and grab raid.
Klopp, watching from high in the stands as he completed a two-match suspension for abusing an official, told his players to hassle Arsenal out of their stride with a high-tempo pressing game and it worked perfectly.
“We knew we had to be disciplined today and we played well,” he said.
“We were good at pressing and caused a lot of problems for a team that wanted to pass the ball but couldn’t.
“When Arsenal had space it was a tiring affair, but we shouldn’t forget who we played against. This opponent deserves a lot of respect.
“We only shot three times and made two goals, but that doesn’t matter. What matters is the result.
“You have to fight at times and we did that. The winner was maybe the best attack in the game with a brilliant cross and a brilliant finish.”
Klopp was naturally delighted with Lewandowski’s latest demonstration of a talent that makes him one of the most coveted strikers in Europe.
He has repeatedly been linked with a move to Bayern Munich, but Klopp is adamant all the speculation has no affect on the Pole.
“With regards to Lewandowski, we need to stop thinking that if he is not playing well it is because he will be playing for another club soon,” Klopp said.
“Robbie plays as well as he can for the team, no matter what is written in the news.”