The Gunners' vice-captain believes if Arsenal can triumph against the German side they will be close to securing qualification to the knock-out rounds.
"We have two very difficult games coming up against Dortmund," said Arteta. "After that we will know exactly where we are in the group. They are a very good side and they are doing well in their own league.
"Winning the first two games makes a difference and now we have a massive game at home. If we win that one we are almost there. I think this is going to be a crucial one."
Arsenal's impressive 4-1 victory against Norwich on Saturday ensured Arsene Wenger's side remained top of the Premier League and a win against Dortmund will cement their place at the top of their group in Europe.
However, despite Arsenal's terrific form - inspired by record signing Mesut Ozil - Arteta understands how difficult it will be to win Arsenal's first Champions League trophy:
"We are still in the group stages. We have to qualify from a difficult group. There are big teams in there - the likes of Barcelona, Bayern Munich and Real Madrid.
"To compete against them on the day you have to be very, very good," Arteta added.
"If we win on Tuesday, it puts us in a great position. Last season we finished second and had to play Bayern. We have started well, we have a very strong team and we have more experience as well."
Arteta can expect to start against Jurgen Klopp's men, with fellow defensive midfielder Mathieu Flamini struggling to make the game following his concussion against Norwich.
Dortmund will be missing Klopp who is currently serving a Champions League touchline ban.