The Gunners head into the game after returning to winning ways with a 3-0 victory at Bournemouth last weekend to leave them third in the Premier League table.
The north London side are currently five points behind leaders Leicester heading into their clash with the Foxes in front of their home fans.
And former Arsenal man Smith believes that the game could end up be a key clash in the Premier League title race for the Gunners.
Speaking on Sky Sports News HQ on Friday, Smith said: Arsenal have got to make sure they’re at it for the big occasions, and this is a huge occasion. It could be a defining moment of their season.
“If they can come through it, then they’re going to have great confidence for the reminder of the season.
“Bournemouth was a must-win game after those four matches [without a victory]. They had lost their confidence, belief, and momentum, so that’s got them back on track and a win on Sunday would get them more firmly back on track.”
Arsenal have won the FA Cup for the last two seasons but have not lifted the top-flight trophy since their famous unbeaten triumph in the 2003-04 campaign.
The Gunners take on Barcelona in the last 16 of the Champions League later this month.
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