It was a result and performance to rank alongside anything the Gunners have produced at home or abroad - but what a shame it will not count for anything. Arsene Wenger's side already knew they could not reach the quarter- finals after losing at Wembley to Lens two weeks ago, and they only came to the Greek capital to play for their pride.
Even that looked a forlorn task without Dennis Bergkamp, Tony Adams, Emmanuel Petit, Patrick Vieira and Marc Overmars. In fact, Wenger was without no fewer than 13 of his squad, including the suspended Ray Parlour and Lee Dixon.
But the Gunners' manager, who has just signed a new four-year contract, could not have started his new term in charge more encouragingly. Nicolas Anelka and Luis Boa Morte grabbed two of the goals which left the Greeks humiliated in front of their own fans. The other Arsenal strike was an own goal by the former Derby midfielder, Aljosa Asanovic.
Panathinaikos who were beaten 2-1 at Wembley in September by Wenger's first-choice team, failed to find any sort of form despite still having a chance of qualification for the quarter-finals.
The Gunners should have had the lead on the stroke of half-time when Boa Morte, pouncing on Anelka's brilliant cross from the right, pulled his shot wide with only the goalkeeper Josef Wandzik to beat.
Seconds after the break, Anelka saw his shot blocked by Wandzik and then stuck out a knee to nudge the rebound against the post. Panathinaikos were completely exposed in the 66th minute when Arsenal had the stroke of luck they needed to go in front.
When the full-back Stratos Apostolakis handled the ball 30 yards out, the 25-year-old Spanish midfielder Alberto Mendez lined up a free-kick which he cracked through the defensive wall on the edge of the box and saw it take a ricochet off Asanovic before nestling in the corner of the net.
The substitute Igor Sypniewski snatched an equaliser in the 74th minute, wriggling through to force the ball past David Seaman and slot it into an empty net. But, five minutes later, Christopher Wreh found plenty of space behind the home defence and, although his pass to Anelka left the striker with plenty of markers around him, he went for his shot and put it just inside the far post beyond Wandzik's despairing dive.
With four minutes to go, Boa Morte, who had missed two earlier opportunities, shrugged off Asanovic and glided his shot inside the near post.
"I am very proud of my players. They showed a lot of maturity and the element of surprise enabled us to score a great victory," Wenger said. "There were some excellent performances, particularly by people like David Grondin and Matthew Upson, as well as the two players up front, where Nicolas Anelka showed his great talent."
Panathinaikos: Wandzik; Apostolakis, Milojevic, Asanovic, Goumas, Warzycha, Lagonikakis, Basinas, Kostantinidis (Strandli, 69), Kola (Sypniewski, 55), Liberopoulos. Substitutes not used: Nikopolidis (gk), Nikolaidis, Alexopoulos, Vokolos, Kiassos.
Arsenal: Seaman; Bould, Vivas, Grimandi, Upson, Grondin, Mendez (M Black, 78), Vernazza, Anelka, Wreh, Boa Morte. Substitutes not used: Manninger (gk), Keown, Garde, T Black, Lincoln, Riza.
Referee: S Braschi (Italy).