Mikel Arteta's team traveled to Italy without Declan Rice due to an injury, adding to their already challenging week as they prepare to face Chelsea in the Premier League following a tough loss against Newcastle. The absence of Rice was evident as the Gunners suffered their first defeat in Europe this season.
Arsenal midfielder Mikel Merino's inadvertent handball gave away the spot-kick, although there was little he could do to move his arm out of the way of Mehdi Taremi's flick. It likely would not have been awarded in the Premier League.
Merino felt he should have had a penalty earlier in the first half when Inter goalkeeper Yann Sommer connected with his head as he punched clear Gabriel Martinelli's cross, but VAR did not see enough to overturn the on-field decision.
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cookies for this session only. Enable CookiesAllow Cookies OnceArteta told TNT Sport his team were "harshly done by" in Milan over the two penalty decisions.
TrendingAsked about it in his post-match press conference, Arteta said: "We were told at the start of the season that wasn't a penalty. That was clear. Today it was a different story. But OK. They decide that is a penalty.
"But if that is a penalty then the one on Mikel Merino where he punches him in the head has to be a penalty, 1,000 per cent. These are the margins in this game and it's very, very difficult to accept."
pundit Paul Merson agreed. "He has literally punched his head off. It's a double punch. It should be a penalty. Merino headed the ball and Sommer has come and punched his head off."
Arsenal put in 46 crosses to no avail, failing to score for the second game running, as William Saliba spurned a good headed chance and Kai Havertz was expertly denied by Inter defender Yann Bisseck, preferred ahead of the impressive Alessandro Bastoni.
Not even the introduction of captain Martin Odegaard in stoppage-time, out for the last 12 games through injury, could inspire a late comeback as Arsenal dropped down to 12th in the Champions League table after Gameweek Four.
Inter, meanwhile, move up to fifth, into the automatic qualification spots, with 10 points from their opening four games, maintaining their unbeaten start to the competition despite having played Arsenal and Premier League champions Manchester City.
Arsenal boss Mikel Arteta on the penalty decisions:
"I don't understand. There is no danger at all. You cannot react because the ball is very close.
"We were told at the start of the season that wasn't a penalty. That was clear. Today it was a different story. But OK. They decide that is a penalty.
"But if that is a penalty then the one on Mikel Merino where he punches him in the head has to be a penalty, 1,000 per cent. These are the margins in this game and it's very, very difficult to accept.
"I am extremely frustrated because these are two decisions that marked the course of the game. Unfortunately there is nothing we can do. We have to accept it and move on.
"This is the way I want to see my team. Of all the big games we have played in Europe, this is by far the best one that we have played in the last few years.
"If we play the way we played here we have a good chance to win against Chelsea. I told them I'm proud of them.
"I haven't seen them play in Europe in the manner they have today. And we are very disappointed because we didn't get what we wanted out of the game that's for sure."
Arsenal's struggles against Inter were reminiscent of last weekend's defeat at Newcastle. They dominated the second half but could not find a way through a dogged defensive performance from their hosts. There was a dearth of creativity.
That was reflected in the team registering 46 crosses throughout the game. Arsenal, a side that have consciously decided against buying a striker for the last two years, were pursuing an approach that required a big No 9.
This was a game screaming out for Odegaard, who of course has been out since late August for Arsenal after suffering a ligament injury with Norway. Arsenal understandably decided against risking him until the final moments, but Ethan Nwaneri was needlessly kept waiting.
The 17-year-old has proven he has the skill and the guile to unlock defences when given the opportunity this season and, in the absence of Odegaard and Rice, this felt like the perfect time to give Nwaneri a chance to show it on the biggest stage.
Arteta handed the teenager just eight minutes of regulation time to make his mark as Arsenal's struggles to discover the form that has made them Premier League title contenders show no signs of going away. Injuries to key players has them in a rut.
The hope for Arsenal is that once Odegaard and Rice are both fit and firing, they can get back to their best. Arteta might need them to do it sooner with another key game at Chelsea next up. It is early in the season, but he cannot really afford any more dropped points.