The Red Devils are eight points behind the Gunners after a poor start to their title defense, but the team is now unbeaten in eight matches in all competitions.
Consequently, Rooney is confident that his side can go some way to bridging the gap at Old Trafford.
"We're obviously capable of beating Arsenal - we've done it many times in the past," the England international told reporters. "They're on a good run of form at the moment and are top of the league, so we know it's going to be a difficult game.
"But we have to go into that game confident, believing we can edge closer to them and bring ourselves back into the mix."
Although Arsene Wenger's side has been in impressive form, having not lost in the league since the opening day, Rooney is hesitant to mark the club down as the title favorite.
"We'll have to wait and see where they are in March," the 28-year-old remarked. "We've seen before that they've been in the top two until February and March and then they've faded off, so it's down to them to try to stay there. They're doing brilliantly at the minute and they're in a great position so it's up to us to catch them.
"We know we're capable of playing better and we're starting to do that. We need to start picking points up and see where we are come Christmas. We're nine or 10 games in so there's no big worry at the minute. We're starting to do well so, if we can get the victory on Sunday, I think we'll be in a great position."
The Red Devils have already drawn at home to Chelsea and Southampton, and lost to Liverpool, Manchester City and West Brom so far this season, but a win on Sunday would put them within five points of the top of the table.