Arsenal is eight points out of fourth place, while Swansea boosted its safety chances after a stunning result in Wales.
Swansea City beat Arsenal 3-1 on Tuesday night to lift themselves out of the Premier League relegation zone, after a horrific mistake by Petr Cech squandered any hope of taking points back to north London on Henrikh Mkhitaryan's debut.
The Gunners were chanting the name of Olivier Giroud all game after the news broke hours before the kick off that Chelsea have agreed an £18m deal for the French target man, while their own new signing Mkhitaryan was sitting on the bench next to him.
Carlos Carvahal unsurprisingly opted for the same starting eleven that beat Liverpool 1-0 in the last match-day, while Arsene Wenger was without Jack Wilshere through illness so Welshman Aaron Ramsey started at the Liberty Stadium.
In the opening exchanges, Arsenal were forced into making two incredible last ditch tackles to save their blushes. Firstly Ramsey slid in to prevent Alfie Mawson an effort on an open goal and then Mohamed Elneny put in a fantastic sliding tackle to stop Sam Clucas in his tracks while bearing down one on one with Cech's goal.
The closest effort of the game came in the 28th minute as the unlikely Mawson found himself hovering on the edge of the box but his bending shot took a nick off an Arsenal player, diverting the ball a whisker wide of the post.
Arsenal then replied themselves with some beautiful attacking interplay ending up at the feet of Alex Iwobi but Lukasz Fabianski was equal to his drive towards the near post.
The game was beginning to open up and Arsenal clinched an undeserved lead in the 33rd minute. Nacho Monreal - who seems to be in the form of his life in front of goal - ghosted in at the back post to knock in Mesut Ozil's cross on the lunge but their advantage didn't last long.
Directly from the restart, Arsenal lost possession in their third and Mawson expertly found Clucas who was despicably left untracked by Grant Xhaka. The midfielder surged into the box and coolly slotted past Cech to make the scoreline even once again.
The Gunners looked at sixes and sevens defensively and Leroy Fer almost made them pay the price by driving from his own half into the penalty box but his tame effort was easily collected by Cech.
Halftime came and went but still no sign of Mkhitaryan just yet. However, when he entered the play on the hour mark, it resulted in circumstances he would not have expected.
Monreal threw the ball back to Shkodran Mustafi who passed it back to Cech but he hashed his clearance straight to Jordan Ayew under the Swansea press. The Ghanaian duly obliged and tapped home for the easiest goal he'll score this season.
Nathan Dyer almost put the game to bed in the 71st minute when he latched onto the shaken Mustafi's header down into his own penalty box but the winger's shot hit the side netting.
Giroud came on in the 76th minute for what is likely to be his final bow in an Arsenal shirt but he had no service.
Swansea then put the cherry on top with three minutes to go as their two best players on the night combined to get a third goal.
Monreal's attempted acrobatic clearance saw him flop to the floor allowing Ayew to storm through and although Mustafi was able to flick the ball away, it fell straight to Clucas who hammered home.
The sublime Swans fly up from the foot of the table into 17th after their sixth game unbeaten in all competitions while Arsenal now remain eight points off the top four in sixth after a truly dire performance.