The Frenchman is impressed with the progression shown by the 23-year-old ever since he took over from the Gael Clichy as the Gunners' first choice left-sided defender
The 23-year-old Gunners academy graduate made his 100th first-team appearance in the 4-1 win over Reading on Saturday.
Wenger has praised Gibbs' development, which has been hampered by a series of injuries, after he was promoted to the starting line-up following Gael Clichy's transfer to Manchester City last season.
"I think this season has been, despite the fact that he was in doubt for a while, a step-up season for him," Wenger told reporters.
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"He has authority, he is decisive going forward, and in games where we were struggling a bit like Swansea in the cup he turned up and was the one who brought the pressure on the opponent.
"Even at Munich when he had been out for six weeks he came straight back in and had a very decent game. For me he has moved into the top three left backs in the country."
Despite Gibbs' impressive displays, his injury problems meant Wenger was forced to add Nacho Monreal to his squad in January to give himself more than one option. In the long term, the Arsenal boss believes competition will help both players improve.
He added: “He is ready for the fight. I did it because I believe you never know with only one left-back.
“You need two. And as well because both can play one in front of the other, so there’s an opportunity to use them both in some games.”