The interim Blues manager wanted to snap up his compatriot during his time in charge at Anfield but was unable to persuade Villarreal to sell the playmaker, who eventually signed for Arsenal from Malaga last summer.
The 52-year-old believes that the £12 million signing has settled well at the Emirates Stadium but warns that his side are more than ready to take on Arsene Wenger's team as he enjoys "top games".
"The chairman there [at Villarreal] wanted to keep the team and didn't want to lose one of his best players," Benitez told reporters of his attempt to buy Cazorla. "It wasn't possible to sign him because it was a big risk with the amount of money we had to spend.
|25/1||Santi Cazorla is 25/1 with William Hill to score the first goal in an Arsenal win over Chelsea
"To come to England and settle down is not just down to the quality of the player but sometimes it also depends on the environment and, in the case of Cazorla, he is doing well at Arsenal."
Benitez's Chelsea side have struggled at home in the Premier League of late, only winning one of their last seven games to fall 13 points behind league leaders Manchester United.
But the manager argues that a derby against a side such as Arsenal is the perfect tonic after Wednesday's 2-2 draw at home to Southampton.
"After a draw at home, we have a top side coming to us and that is good for us," he observed. "It gives us extra motivation and we will be focused. This is different from a normal game because the atmosphere is different.
"But if you are a top side you are pleased to play in this kind of game. The main thing as a manager is how to keep your players motivated in every game. With this game, it is easy. I like top games."