The Gunners have made positive progress in their first season without Arsene Wenger.
Unai Emery has earned plenty of plaudits in his debut campaign, with Arsenal considered to have taken a step forward since parting with an iconic coach who spent 22 years at the helm.
The club are back in the hunt for a top-four finish, while they are also through to the semi-finals of the Europa League once again.
Parlour believes that Emery has exceeded expectations, but concedes that there is still much work to be done when it comes to tweaking a squad that requires another refresh in the next transfer window.
The former Gunners midfielder told talkSPORT of the present and future in north London: “This was always going to be a big test for Emery this season.
“I said at the start of the season if they get fourth place it would be a brilliant season for Arsenal.
“He’s still finding out his squad and the transfer window is going to be very interesting to see what he does, whether he moves any players out and brings more in.
“As much as Manchester United need a big clear out, Arsenal probably do as well.”
Arsenal’s top-four bid suffered a surprising setback in their most recent outing against Crystal Palace.
A run of 10 straight Premier League successes on home soil was ended with a 3-2 defeat at Emirates Stadium.
Emery has been questioned for shuffling his pack against the Eagles, and paying the price, but Parlour believes the Spaniard still deserves praise for what he has achieved this season.
The ex-England international added: “After seeing Manchester United and Spurs lose, it was a really good opportunity at home.
“So you would have fancied them, I didn’t see five goals in the game.
“The team selection was very strange. They’d just come off the Napoli win and you’re thinking, ‘let’s kick on now, there’s only four games left, play your strongest team’, but he didn’t.
“There were a few mistakes from the manager, but you can’t knock him because he’s done a wonderful job so far.”
Arsenal will be back in action on Wednesday away at Wolves, with three of their remaining four fixtures set to take them out on the road.