The attacking midfielder missed a crucial penalty in Wednesday's 2-0 Champions League defeat against Bayern Munich and was rounded on by Mathieu Flamini in the second half for failing to track a forward run from Arjen Robben.
Ballack fears his compatriot has not been completely accepted by the rest of Arsene Wenger's team.
"With his quality he should be untouchable and bring out so much in the team. But it looks like he does not have the acceptance of the team," he told Sky Sports.
"When he came to Arsenal there was so much expectation with the quality he has. The first games he looked good, played well and was comfortable. But now he looks a bit lost in this team."
Ozil, 25, has so far made 32 official appearances for Arsenal, scoring five goals in the process.