Wenger, who won the French title and the Coupe de France in a seven-year spell at Monaco, saw his current charges put to the sword as Yannick Ferreira-Carrasco's late strike put Arsenal on the brink of elimination.
Alex Oxlade-Chamberlain had given the hosts hope when he curled home a strike deep into stoppage time to make it 2-1, but fellow substitute Ferreira-Carrasco restored Monaco's two-goal lead on a dark outing for Wenger's men.
Having survived an early Arsenal onslaught in the sides' first competitive meeting, Monaco led at the break thanks to Geoffrey Kondogbia's rather fortuitous strike, which deflected in off Per Mertesacker.
Leonardo Jardim's men doubled their advantage seven minutes after the interval as former Tottenham striker Berbatov finished off a swift break to put the visitors well in control.
Oxlade-Chamberlain looked to have had the final say when he pulled one back with an impressive strike, but Monaco, missing Jeremy Toulalan, Ricardo Carvalho and Layvin Kurzawa from the starting XI, were not finished.
Ferreira-Carrasco's 94th-minute goal deepened Arsenal's woes further and leaves Wenger's side in need of a minor miracle at the Stade Louis II in three weeks' time, with their limp attacking display pointing to a fifth consecutive last-16 exit.
Monaco conceded just once as they topped Group C, but were under pressure early on as Danny Welbeck was among those to threaten Danijel Subasic's goal with an effort that was narrowly off target.
However, the resurgent visitors - beaten just once since the start of December - seemed to grow in confidence with Joao Moutinho pulling the strings in midfield.
As Monaco frustrated Arsenal's array of playmaking talent, chances were few and far between in the opening half an hour, although Alexis Sanchez angled a shot just over the crossbar soon after.
However, Monaco broke the deadlock seven minutes before the break with the help of a sizeable deflection, as Kondogbia's long-range strike hit Mertesacker and beat a wrong-footed David Ospina.
Having failed to register a shot on target in the first half, Arsenal were made to pay for their profligacy after the break when Anthony Martial punished slack defending from Mertesacker to burst forward and find Berbatov.
The Bulgarian made no mistake in giving Monaco a two-goal lead - much to the home fans' consternation - as Wenger's men continued to waste chances, with Sanchez's effort saved by Subasic before Olivier Giroud fired over with the goal at his mercy.
Subasic saved well from substitute Theo Walcott after the hour and Welbeck's follow-up deflected off the England international before Oxlade-Chamberlain curled home a loose ball.
If Arsenal thought they had grabbed hold of a lifeline, it was quickly ripped from their grasp as Ferreira-Carrasco raced away to fire past Ospina and put the visitors in the driving seat ahead of next month's return meeting.
