The Gunners chief chose Leno as his first choice and opted to sell Emiliano Martinez to Aston Villa despite the fact he helped them lift the FA Cup last season.
But Leno was the Carabao Cup hero as he saved from Divock Origi and Harry Wilson in the shootout to set up a quarter-final clash with Manchester City.
Arteta said: “We didn't want Emiliano Martinez to go but it was probably the right thing for both parties to do.
“I am really happy for Bernd's performance and his character. He really helped us.
“I really have belief in Bernd.”
Leno had made a number of big saves in the game to even get Arsenal to a penalty shootout.
“You need a top individual performance to win at Anfield and that is what we had tonight,” added Arteta.
Mohamed Elneny was the first to miss for Arsenal after Alexandre Lacazette and Cedric Soares scored.
Origi had a chance to put Liverpool 4-2 up after James Milner and Gini Wijnaldum scored.
But his was saved before Ainsley Maitland-Niles levelled.
Curtis Jones and Nicolas Pepe then netted before Wilson's penalty was saved and Joe Willock made it 5-4.
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Kop boss Jurgen Klopp joked his Liverpool side had prepared his fellow German for the shootout after peppering him with shots.
He said: “We shot him warm for the penalty shootout.
“I like a lot of parts of the game but we lost in the end and that is the part of the game we don't like.”