Toure was making a name for himself with Belgian side Beveren at the start of his career when he linked up with the Gunners for a trial period and impressed Wenger.
Wenger was keen to do a deal to bring Toure in alongside brother Kolo, who was already at the club, but after a delay in gaining a work permit the midfielder opted instead to join Metalurh Donetsk in Ukraine.
Toure has gone on to become one of the finest midfielders in the game and will line up against Arsenal for Manchester City in Saturday's crucial Premier League clash.
"It's up at the top," Wenger said when asked how highly missing out on Toure ranked on his lift of regrets. "But let's not forget that Yaya Toure had an agreement with us and it's not because we did not want to sign him that he went to Ukraine.
"We had to wait for his passport in Belgium. We have made mistakes [with transfers], but this was not a mistake.
"He preferred to go to Metalurh Donetsk because he could go there without a passport."
Toure has scored 21 goals this season and Man City boss Manuel Pellegrini believes he would be a worthy winner of the Player of the Year award.
Luis Suarez is a frontrunner for the prize after netting 28 goals in 30 games for Liverpool, but Pellegrini hopes his man can finish the season strongly and get the nod.
"I think he has had a very good season so far and we hope he can continue," said Pellegrini.
"Hopefully we will win the title and he can be the best player."
Asked to compare Toure's season with that of Suarez, Pellegrini said: "I do not want to compare him with anyone.
"Both of them have had amazing seasons so far. But they must try to finish the season in the same way. And after that it will be the same as the fight for the title."