Pierre-Emerick Aubameyang scored an equaliser in the second half after Kelechi Iheanacho scored early on, but his efforts were undone by a Jamie Vardy penalty and a late goal from Manchester City target Riyad Mahrez.
Speaking after the the defeat, his penultimate game in charge, Wenger said 'overall it's very sad' that his players did not get more out of the game.
"It’s a frustration," Wenger told arsenal.com, "because I believe we played a great game and with 10 against 11, we have shown quality in our game, spirit, and overall it’s very sad because the decision went against us and we are upset because we lost a game we should not have lost.
"That’s a fact we have to face. It has not big consequences but it’s just in a continuity in what we have faced all season."
Konstantinos Mavropanos was shown a red card for fouling Kelechi Iheanacho in the first half and Wenger criticised the decision "because Holding would have caught this ball. He [Mavropanos] was not the last man."
Further controversy arrived when Leicester were awarded a penalty in the second half, another matter that Wenger had strong words for.
"The penalty is a very creative, imaginative aspect from the referee. We watched it again. It’s a nice dive but it’s not a penalty."
With Wenger departing at the end of the season, the 68-year-old Frenchman insists he is not worrying about handing over his team to the new manager that arrives this summer.
"I feel that if you look at our season, at home we have had championship-winning form," he explained. "Away from home we have had the consequence of many things: a lack of confidence because of a few bad results, and after that we neglected some games because we were in the Europa League.
"The quality is there, the spirit is exceptional. I think if the team has one or two good away results next year, they will play for the Premier League - I’m convinced because there’s something special in that team, which will come out next season. I’m convinced that Arsenal will be one of the top contenders next year."
During the latter stages of the game, Leicester fans gave the Arsenal boss a standing ovation as 'There's Only One Arsène Wenger' echoed around the King Power Stadium. Wenger greeted the gesture with a wave to the Leicester fans and again showed his gratitude after the game.
"I’m grateful for the reaction of the crowd," he said. "Overall, I’m frustrated because we lost the game. I think Leicester is a fantastic football club. I managed here when Guppy, Izzet and all these guys played here. They always played in the Premier League, they always had good teams. They always do good work, so it was a nice reception from the fans as well."