With Manchester United's game against QPR finishing before City take to the pitch at the Emirates Stadium, Mancini's men could be eight points behind the defending Premier League champions by the time they kick off.
Mancini concedes that would be too big a gap for City to close if they don't beat Arsenal, but he remains positive his players will make United sweat right until the end of the season.
City dropped off the top for the first time in five months after defeat at Swansea and draws with Stoke and Sunderland in what could prove to be a costly March.
However, Mancini won't give up hope with seven games to go in the title race.
"If we lose against Arsenal and they beat QPR, yes," Mancini said when asked if the title race would be over.
"But I can say I am proud of what the players have done in this championship. We were on the top for a long time and we have been fighting with United until now.
"I think we have improved as a team, in the Premier League title. I think we have improved a lot as a team but it is not finished now. I don't believe this championship is finished.
"If United win all their games, congratulations they deserved to win the title. But seven games from the end I think anything can happen. We lost four points in two games. It can happen to them."
While Mancini remains positive, he also hinted that tiredness could be a factor in City's recent slump.
"After seven months it could be that we have some players tired but it is not only us," he said.
"The other teams have tired players. In this moment it is important to be strong."
Arsenal boss Arsene Wenger has warned City a draw will not be good enough for them this weekend.
"What is for sure is that a draw for them is not good enough certainly," Wenger said.
"It is true that in the last two seasons they came to play for a draw, and they got it, but I believe that this time, both teams are in a situation where they want to win.
"It will not be over but it will make things very, very difficult.
"They will fight until the last. But I believe we should wait and see what happens over the weekend.
"Unfortunately we are not involved in the title race and we will let them sort it out between themselves, but at the moment Manchester United have the advantage."
Arsenal's focus remains on ensuring they finish ahead of bitter rivals Tottenham and secure third place, which guarantees automatic qualification for the Champions League.
The Gunners suffered a surprise defeat against QPR last weekend that ended their seven-game winning streak, but they remain ahead of Tottenham on goal difference.
Wenger added: "The momentum is still there because I feel that in the last eight games we have won seven.
"But it (the QPR defeat) was an interruption and a disappointment. We want to come back to what was our recent level. That means playing well and therefore winning the game."
Arsenal have no new injury worries, while Samir Nasri returns from injury to face his old club. Sergio Aguero and Joleon Lescott are also set to return for City.
Source: AFP
Source: AFP