"We need a win there. It's a good team, so we need to fight hard to get three points," the Nigerian international told the club website (www.mancity.com) ahead of third-placed City's trip to their sixth-placed rivals.
"We are in a good situation. We played well against Liverpool and showed good character. We are in a good position in the Premier League, we keep fighting and focus on the next games."
Manager Pep Guardiola, who joined Man City at the start of the season, signed Leroy Sane and Gabriel Jesus to boost his attacking options with their arrival limiting Iheanacho to just eight starts this campaign.
The Nigerian, however believes he is constantly improving by being around "great players" and is ready to answer the call whenever he is presented with an opportunity to shine.
"I'm very happy and very grateful to be in this team," he added. "I keep working hard every day and when I get my chance I have to prove to everyone I need to be in the squad."
Man City defeated Arsenal 2-1 at home in December and have an opportunity to go 10 points clear of the North London club with a win on Sunday.
(Reporting by Hardik Vyas in Bengaluru)
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