The French manager has voiced his opinion that the Brazilian still has a few good years left, but believes the Germany international's presence could limit his playing time
The 29-year-old joined Madrid from AC Milan in the summer of 2009, but a string of injuries have prevented him from making an impact so far.
However, he has now returned to full match fitness and impressed with a superb performance in Real Madrid's 3-0 Champions League win over Ajax last week.
"Kaka is doing really well again. However, I do believe that he's not at the level he was at with Milan just yet. The next step for him is to get a lot of playing time again," Wenger was quoted as saying by Sport.
"The problem for Kaka is that he plays in the same team as Ozil, who is young and very strong. It will not be easy for Kaka to become an undisputed first-team player again.
"Everyone said that he was finished a while ago. He should be judged by his recent performances though. It's not easy for a player like him to find his best form again after a lengthy absence. He needs some time to get back on top."
Kaka has been linked with a move away from Madrid more than once, but the Brazilian has consistently dismissed all exit rumours.