The defeat is the second time Arsenal has lost in the final of Europe's premier club competition, although this time it can console itself knowing it has won its first English domestic title in 22 years.

The London club took the lead in Budapest against PSG when Kai Havertz scored after just six minutes, but it was eventually pegged back by an Ousmane Dembele penalty and then suffered penalty shootout heartbreak after extra-time.

A crestfallen Arteta said his club now needs to make some "very important decisions" if it wants to become a dominant force both domestically and in Europe.

"First of all, I would take a few days with my family and then we will start the process to review what we've done," Arteta said.

"If you want to reach another level, we're going to have to show that ambition because we are more than capable of doing it, but it demands to be very, very ambitious, very fast and very smart."

PSG dominated possession after Arsenal shocked the reigning champion by taking the early lead.

It was only once the French side equalised in the 65th minute that Arsenal pushed on, although that left more of the kinds of spaces in behind on which PSG's dangerous attack thrives.

The centre-back pairing of Gabriel and William Saliba put in near-faultless performances as Arsenal stifled PSG. But Brazilian Gabriel was the unfortunate one to miss the decisive penalty and leave the French side the winner.

Arteta said he felt Arsenal could have had a penalty of its own when Noni Madueke fell under pressure in the box in extra-time, but he didn't want to use that as an excuse.

"If, if, if is not what happened," the Spaniard said. "So we need to do better, to improve and find different margins to get the outcome."

Both Arsenal captain Martin Odegaard and the team's midfield engine, Declan Rice, echoed Arteta's disappointment.

They put in a hard shift. PSG had 72 per cent of possession compared to Arsenal's 28 per cent and made roughly four times as many attacks and completed passes.

"It’s small margins that will decide a game like this and when it’s penalties even more so," Odegaard said. "That's the reality of football and we have to deal with that."