Graham managed the north London club between 1986 and 1995, and believes he wouldn't have kept his job if he had gone eight years without a trophy at Arsenal.
Wenger's last trophy with the Gunners came in 2005, and Graham thinks Wenger raised the bar of expectation to a point he's since failed to match.
When asked if he would still be in a job in Wenger's position, Graham told talkSPORT: "Probably not, probably not.
"Let's be honest, Wenger's first spell at the club was phenomenal. He was up there at the time beating Sir Alex Ferguson. Three league titles, winning FA Cups, that's a phenomenal record, it's fantastic.
"He has raised his own bar and he has to ask himself if he has fallen a little bit. I just think in the last few seasons, the standards have slipped."
Graham won two English league titles and a number of cup competitions, including the League Cup twice and the FA Cup, during his reign as Arsenal manager.
The Scot didn't go as far as to suggest that Wenger should be fired, but he questioned his recent activity in the transfer market and his commitment to his expansive, adventurous style of play.
"Arsene's philosophy since he came to the club is attacking football and he cannot set out to play a tactical game," Graham continued. "He loves all his players to go forward, that is his philosophy.
"It was great for his first seven years at the club. Phenomenal teams playing attacking football and making good players into world class players, but in my opinion, the players who are coming into the club are inferior to the players who were there a few years ago."
Arsenal face Bayern Munich in the Champions League second-leg match of the last-16 tie on Wednesday evening. Wenger's side hope to overturn a 3-1 first-leg deficit, but they go into the fixture without this season's standout performer, Jack Wilshere.
The England international will be "rested" for the next three weeks, after picking up an ankle problem against Tottenham.