Yaya Sanogo gifted Arsenal an early lead before Alexis Sanchez put the match to bed after the break and Subotic feels BVB were simply not good enough to get a good result.
"We weren't at our peak. There's a lot we could have done better and even though we didn't play our best we still had chances. Sadly we didn't score any, but I can't say the result wasn't fair. We did not play well enough to deserve a win," Subotic told Uefa.com.
"They scored their goal, we started chasing the game a bit and never really got to the point where we put them under so much pressure that they had to make unforced errors. They had plenty of time and we didn't put our game on the pitch.
"As time moved on we got better and better but with the second goal the next big hit happened. After that it was just us trying to chase the game and get a goal at any cost and we just didn't have the luck to do that. To be honest we didn't deserve much more."
Dortmund can still finish top of their group if they beat Anderlecht on matchday six and the defender insists it is vitally important that they do so.
"It is extremely [important to finish top], that's why we wanted to seal the deal on Wednesday. We knew Arsenal were going to be tough but we also knew that they are beatable. Our plan was to take home a point, but sadly that didn't happen.
"Now we have the next game [at home to Anderlecht] to seal the deal and we have to do it. At this level [finishing top] can be a big help for the next round and we have the goal set to finish first."
Dortmund hold a two-point lead over Arsenal heading into the last round of matches.