Deco believes Chelsea can knock Arsenal out of the title race with victory in Sunday's big game at Stamford Bridge.
The Gunners had battled back into contention for top spot after being emphatically beaten by Chelsea back in November.
However, last week's defeat to Manchester United has left them six points off the pace and in vital need of a win against Carlo Ancelotti's Blues.
Deco reckons Arsenal have been found wanting at key moments this season and does not feel they could be considered challengers if they lose another important game.
"Arsenal have a good squad but this season have failed in the big matches against United and us," he told The Sun.
"That is the key when it comes to fighting for the title and perhaps the pressure and the anxiety of it all is damaging Arsenal's performance at decisive moments.
"Sunday's match is so important. It is certain that defeat for Arsenal will eliminate them as a rival for the title.
"If Arsenal are nine points behind us it's not just a matter of that distance but the question of morale.
"If we beat them again they will have to think about two defeats against us and that will be a very negative situation for them. So this match is like a final for them and this extra pressure is a positive for us."
Deco does not think Arsenal have the experience to compete with Chelsea and Manchester United, particularly after suffering injuries to key players.
"Injuries affect many teams and I think they have a real problem in attack where the absence of Robin van Persie has proved to be a very important factor," said the Portuguese midfielder.
"Their young players have been sensational but they have still not exploited their chances to become champions. United, for instance, have more experience and that is what matters at this stage of the season.
"So it is normal that the race is between United and Chelsea. Predictions made in the summer are being fulfilled."
As well as targeting Premier League glory, Deco hopes Chelsea can secure a first UEFA Champions League crown and win the FA Cup.
"To win the Champions League is never easy. We lost to Barcelona in the semi-finals last time but Chelsea can make the final this season," he said ahead of the last 16 tie against Inter Milan.
"In Europe we always say that each match is the final - this is the mentality exhibited by the coach. Facing Jose Mourinho and Inter Milan in the next round will be very special.
"I am a friend of his but, like any professional would do, my objective is to knock the Italians out of the competition.
"Carlo Ancelotti is a big coach himself and nobody doubted this from the time he arrived last summer. It was clear to the entire squad from the very first day due to his character, the sacrifices he is prepared to make and his work every day.
"I do think Chelsea are favourites to win the treble. The FA Cup is a beautiful trophy and our dream is to get to the final.
"Other big clubs are already out and, with respect to our rivals, this gives us a good chance along with the Premier League and Champions League."