The Gunners forward says Arsene Wenger's side must be clever and not go out all guns blazing.
Indeed, the 25-year-old believes the Gunners should not go all out for a win against the Premier League champions and, instead, play tactically for the draw.
It is something Arsenal managed last season, when they drew 1-1 with City at the Emirates Stadium - but Walcott's side still dropped too many points in other big games, including a 6-3 defeat in the reverse fixture against Manuel Pellegrini's side.
Liverpool, meanwhile, traveled to the Etihad Stadium earlier this season and lost 3-1 at Man City.
The answer, then, could lie in being clever and earning a point without going out all guns blazing, says Walcott.
“We can’t afford to lose the big games this season," the forward told the London Evening Standard.
"If things aren’t going well, much as you always want a win, sometimes a draw is not bad. It is probably the worst thing the fans could hear - they want to just hear we will go guns blazing and try to win the game.
“But in the grand scheme of things, if you think we had an opportunity to win the league and lost it by seven points, if we had picked up a few draws in those games, you never know what might have happened.”
Walcott has been out injured for several months after tearing his Anterior Cruciate Ligament against Tottenham Hotspur in January.
He could finally be set to make his Arsenal return, however, with some reports suggesting he could return for the Gunners' clash against - you guessed it - Spurs at the end of the month.