A 4-0 defeat in the first leg of the European tie at San Siro has all but knocked the Gunners out of the competition, with Wenger labelling the display Arsenal's "worst night in Europe."
"It was a shocking result and a shocking performance," Wenger admitted after the match.
"We made mistake after mistake and were deservedly punished. It is a night we will never forget - our worst in Europe by far.
"There was not one moment in the entire 90 minutes when we were in the game. We were very poor in attack and in defence and we were never in the game.
"It would not be fair for me to blame the pitch, which was a disaster, because our performance was at the same level."
Despite admitting progression was all but impossible, Wenger insisted that he had not taken the wrong approach to the game tactically.
"We do not live in a dream world and we have to be realistic," he said.
"There may be a statistical chance of two per cent we can still go through but realistically we are out of this competition.
"I can't say I did everything perfectly when we have lost 4-0 but I don't believe we made big tactical mistakes."
There was a danger, Wenger conceded, that the comprehensive nature of the defeat could have longer lasting repercussions on the Arsenal squad.
"Now there is a danger that a disappointment as big as this will have consequences on our belief for the rest of the season," Wenger said.
"We have a very big game in the FA Cup at Sunderland on Saturday and it's an opportunity to show we have the mental strength and character to respond to such a shocking defeat.
"We have let our ambitions down and all the players are very sad. But now we have to stick together and win our next game."
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