The English Premier League side, still smarting from their FA Cup defeat to Blackburn Rovers at the weekend, had looked upon the competition as their last hope to end an eight-season trophy drought.
But after the convincing defeat at the Emirates, Wenger could only pay tribute to his opponents.
"You have to give them credit for their class," he said.
"In patches in the first half, it was a difference of quality in their display to ours. Bayern were fully confident and we paid for it.
"At 2-0 it became very difficult, but we put in a good battle in the second half.
"It looked like we might come back to 2-2, but unfortunately conceded another goal, which was a big blow.
"From that moment on, you could see we might concede one more because we didn't keep our structure."
Wenger accepted it would be an almost impossible task to overall such a deficit.
"Let's not hide the truth: it will be extremely difficult against a team of that quality, they didn't play two finals in the last three years for nothing," he said.
"We have to give our best and hope we have built our confidence up a bit more, because that belief will be needed."
Bayern silenced the crowd at the Emirates Stadium in just seven minutes, after Toni Kroos got on the end of a Thomas Muller cross to crash the ball off the turf and past Wojciech Szczesny.
Muller then made it two just before the halfway mark, jabbing the ball past Szczesny from close range after the goalkeeper had parried Daniel van Buyten's header from a corner.
As Arsenal's tempers began to fray, they sparked into life ten minutes into the second half when former Bayern player Lukas Podolski connected at the far post with Jack Wilshere's corner.
But Bayern upped their pressure on the hosts and, after Olivier Giroud fired a shot straight at Manuel Neuer, Philip Lahm cut down the right and crossed into the path of Mario Mandzukic, who shinned the ball over Szczesny to make it 3-1.
Wenger must now lift his beleaguered players for the Premier League run-in, where they face crucial games against Tottenham and Everton in their bid to salvage something from the campaign with a top-four finish.
"We will have two battles, but maybe the easier battle will be to be back in the Champions League," he said.
"But we have to give everything to try and change things in the second leg."
Jupp Heynckes, the Bayern Munich manager, hailed the "astonishing" form of his side following another imperious display.
"Arsenal allowed us a few things in their defence, but we are in astonishing form and can punish even the smallest mistakes of the opponent," he said.
"At times it was quite difficult for us, we had to work hard, but even when they were putting pressure on us, we coped well."
Heynckes' side finished as runners-up to Chelsea last season, and despite their advantage in this tie, he is not taking anything for granted.
"You cannot afford to underestimate an opponent because in football, we have seen everything," he said.
"But in this season it is very difficult against us, you can see that with our position in the league, conceding just seven goals, that is amazing."
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