The Gunners were boosted earlier in the day by news that Liverpool had lost 1-0 to Crystal Palace.
But a first Premier League loss of 2024 saw Arsenal fail to capitalize and left fellow rivals Manchester City two points clear with six rounds of fixtures remaining.
Premier League table - as it stands
How the top of the Premier League table looks following defeats for both Arsenal and Liverpool on Sunday, April 14.
Team MP W D L GF GA GD Pts
1. Man City
32
22
7
3
76
32
+44
73
2. Arsenal
32
22
5
5
75
26
+49
71
3. Liverpool
32
21
8
3
72
31
+41
71
4. Aston Villa
33
19
6
8
68
49
+19
63
5. Tottenham
32
18
6
8
65
49
+16
60
Arsenal dominated the first half in terms of chances - recording 14 shots to Villa's six - but it was the away side that came closest to scoring when Ollie Watkins struck the inside of David Raya's post.
At the other end, Villa keeper Emiliano Martinez made three saves before half-time, including a brilliant close-range block to thwart Leandro Trossard.
But Villa improved massively after the interval and bossed the second period.
Unai Emery's men deservedly took the lead in the 84th minute when Leon Bailey tapped home at the far post after a deep cross from Lucas Digne had evaded four Arsenal players, including the keeper.
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As Arsenal pushed forward in search of an equalizer, Villa sat deep with 10 players behind the ball.
But Watkins stayed up and sealed an impressive victory in the 87th minute when he beat Raya with a cheeky chip after running onto a long-range pass from Youri Tielemans.
Highlights: Arsenal 0-2 Aston Villa
Speaking to Sky Sports after the game, Watkins said: "It's massive to come away to Arsenal when they're playing such good football and controlling games, to play like that just shows where we've come and where we're going.
"It was probably a perfect away performance."
Watkins added: "I grew up supporting Arsenal but it's a different story now that I'm playing against them."
Sunday's win saw Villa tighten their grip on fourth place. They now have 63 points from 33 games, while Spurs have 60 from 32.
Ollie Watkins pictured (right) chipping a shot over keeper David Raya (left) to score for Aston Villa in a 2-0 win over Arsenal in April 2024
Ollie Watkins pictured (right) chipping a shot over keeper David Raya (left) to score for Aston Villa in Sunday's 2-0 win over Arsenal at the Emirates Stadium IMAGO
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