The former forward says his old side will be 'buzzing' after their Capital One Cup victory over Tottenham.
The Gunners ran out as 2-1 winners in their League Cup clash on Wednesday evening, with Mathieu Flamini scoring both of their goals to see them through to the next round.
It was a big win for Arsene Wenger’s side, who had lost their last two games against Dinamo Zagreb and Chelsea respectively.
And Henry says they will be brimming with confidence heading into their next game against high-flying Leicester after claiming the scalp of their fiercest rivals.
“It is massive. Huge. Let's fast forward a bit. You don't want to go to Leicester having lost that game,” he told Sky Sports.
"They won the derby, and you saw how they played. They fought well, they had character, it wasn't just flamboyant Arsenal. They're going to be buzzing, there will be happiness around the dressing room and the training ground.”
"I still think they're going to be challenging"
The former forward has also backed his old side to challenge for the Premier League title this season in spite of their struggles so far.
The Gunners had been billed as serious contenders this season after finishing the last campaign as one of the in form sides in Europe, resulting in them securing a second successive FA Cup triumph.
However, a poor summer transfer window - in which they only brought in Petr Cech - and a slow start to the season has left them trailing behind the likes of Manchester City - five points off the pace.
Following City’s loss to West Ham United, though, Henry says there is still hope of mounting a bid for domestic dominance.
“I would have been more worried if Man City had won against West Ham, but they didn't,” he added.
“Things can happen in this league, as we all know. I still think they're going to be challenging. Are they going to be winning it? I don't know. I think I still see City being up there at the end of the season."