The 35-year-old admitted that his side's recent poor form is a real cause for concern and has let the Gunners sneak up on them
Dimitar Berbatov's goal condemned Spurs to their third defeat in a week after previously going down to Liverpool and Inter, allowing Arsene Wenger's side to close the gap on its north London rival to four points, with a game in hand, after they saw off Swansea 2-0 on Saturday.
Following its derby victory over the Gunners in February, Tottenham had looked to be in the driving seat to clinch a Champions League qualifying berth, and potentially even second place, but Villas-Boas has admitted that his men face a big challenge to arrest their recent poor form and turn their fortunes around.
"Merit to them [Arsenal] for getting back into it," Villas-Boas told reporters. "We couldn't get the result that we wanted at Liverpool, but we had an excellent performance, now the situation has shifted and they are in with a chance.
"We just have to continue. Now it has shifted in two weekends, the situation has become different. Arsenal are still competing, with Chelsea getting the result today and going back to third place.
"Obviously we have the game against [Chelsea] that will hopefully enable us to get back to third or bring Man City a little bit closer to us, but it is extremely difficult. We have to gather the most amount of points from these next games."
The Portuguese boss is also wary that the loss to Martin Jol's side, the second consecutive league defeat following a 12-game unbeaten streak, could signal a similar slump to the one that cost Harry Redknapp a Champions League place, and ultimately his job, last season.
"It's been a difficult month for us. If we are able to find our form, our confidence, our wins, then we can invert that cycle that happens normally with Spurs," he added. "You can't hide from what has happened previously with Spurs. You just have another opportunity to fight.
"Whatever is written and compared to the past is fine, we just have to make sure we are able to fight against it."