The Gunners are now looking over their shoulder at Burnley who are two points further back in 7th.
Arsene Wenger has slammed a decision by Premier League clubs to not use VAR next season, calling the decision "very, very bad" and warning that it leaves English football "behind the rest of the world".
City have already amassed an impressive 87 points this season with five games to go, meaning they are still on course to become the first team to break the 100 point barrier in Premier League history.
This match against Rafa Benitez's side doesn't really hold too much significance for the Gunners with a place in the top four all but gone, with all the focus on the Europa League.More news: Niko Kovac named Bayern coach from 2018-19 season
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Alex Iwobi nearly doubled Arsenal s lead moments later with a stinging strike that forced a good save from Martin Dubravka.
Perez made a perfectly-timed run to meet Yedlin s cross with a fine finish that flashed by Petr Cech at his near post.
Calum Chambers could have restored Arsenal s lead before the interval, but the defender shot wide from Mustafi s knock down. Arsenal show no interest in the Premier League losing in northern England. Two points separate the teams and Arsenal's focus is now on winning the Europa League to qualify for next season's Champions League.
But it was Newcastle who landed the knockout blow in the 68th minute.
Arsenal dominated possession in the final stages but failed to test Newcastle goalkeeper Dubravka; the only scare occurred when the Slovakian dropped a cross and Lacazette hit the side-netting from a tightangle.