England forward Walcott came off the bench at Brighton to score a deflected goal with five minutes left which sunk the Championship side 3-2.
Arsenal will head into next Wednesday's home Premier League clash against Liverpool on the back of two confidence-boosting victories last week, which Walcott feels show Wenger's men can finish what has been a testing campaign on a high.
"I am very confident in the team, this team just needs to realise how good we actually are and not read into too many bad thoughts," Walcott said on talkSPORT.
"We have a very good team, very young and great on the eye at times.
"We can be cold at times as well, but we are starting to learn and we are starting to get back to our best."
It did indeed take Arsenal - with six changes from the starting XI which thumped West Ham 5-1 on Wednesday - a while to get going yesterday at a compact venue which had already seen Premier League Newcastle bundled out in round three.
Brighton winger Will Buckley tormented stand-in full-back Andre Santos down the right, before Ashley Barnes saw his close-range effort well saved by Wojciech Szczesny.
Even after in-form Olivier Giroud had fired the visitors ahead after 16 minutes, the Seagulls refused to lie down and were level when Barnes headed in unmarked from a short corner.
Another superbly taken effort from Giroud, his fourth goal of the week, put Arsenal back in front, and the France striker almost chalked up a hat-trick with a left-footed half-volley which Casper Ankergren beat away.
Brighton capitalised, pressing forwards and again undid Arsenal with a simple ball into the penalty area from the flanks as Barnes turned provider for Argentinian forward Leonardo Ulloa to score with a diving header on his debut after signing from Almeria.
Arsenal manager Arsene Wenger sent for reinforcements with 20 minutes left, bringing on Walcott and Jack Wilshere, soon to be followed by Kieran Gibbs.
The changes proved key as the Premier League side lifted the tempo, with Walcott's strike deflecting in off Adam El-Abd after Brighton failed to clear a corner.
Wenger admitted he had taken a gamble with his team selection, but one which he felt was necessary.
The Arsenal boss said: "With the number of games we play, you cannot only play the same 11 in every single game.
"We play against Liverpool now on Wednesday, Stoke on Saturday and then after the players go away for international games."
Giroud continues to grow into his role at the head of the Arsenal attack following a £13million summer move from Montpellier.
Wenger said: "Giroud is getting stronger after the slow start he had.
"He is a fighter and he wins every ball in the air, so for us that is a bit unusual."
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