Paris St Germain, who are seeking their first Champions League title, will take on Barcelona
Atletico looked dead and buried when Dimarco pushed home Inter's opener.
"A magic night. We expected a really tough opponent. It's very difficult to generate momentum and that's credit to (Porto)," Arteta told reporters.
The Spanish champions won 3-1 at the Olympic Stadium to seal a 4-2 aggregate win against last year's Serie A winners, returning to the last eight for the first time since 2020.
The teams were locked at 1-1 on aggregate after an absorbing second leg at the Emirates but Raya saved twice in the shootout to break the hearts of the two-time champions.
The 16-year-old winger could prove crucial in the Champions League last 16 second-leg clash with Napoli on Tuesday at the club's temporary Olympic Stadium home.
The Spanish Football Federation (RFEF) suspended the 20-year-old for showing contempt towards referee Jesus Gil Manzano after receiving a red card in Real's 2-2 league draw with Valencia on Saturday.
The English champions have not lost a Champions League game at the Etihad since 2018 and became the first side in the competition's history to score three or more goals in nine consecutive home games.
Manuel Akanji and Julian Alvarez struck early at the Etihad Stadium to put the tie beyond reach. Mohamed Elyounoussi pulled a goal back for the Danes before Erling Haaland scored in first-half stoppage time.
The Gunners have not reached the last 16 of the Champions League for seven years and last made it to the quarter-finals back in 2010.
The 62-year-old Mazzarri became the second man to be sent packing this season by the ailing Italian champions.
Real Madrid coach Carlo Ancelotti on Saturday steered away from talk of Kylian Mbappe signing for the Spanish giants in the summer at the end of his Paris Saint-Germain contract.
Inter Milan stretched their lead at the top of Serie A to 10 points on Friday after cruising past sorry Salernitana 4-0 ahead of their Champions League clash with Atletico Madrid.
Ciro Immobile fired Lazio towards a first Champions League quarter-final in nearly a quarter of a century in Wednesday's 1-0 win over Bayern Munich which plunged their troubled opponents even deeper into crisis.
Kylian Mbappe scored the opener as Paris Saint-Germain took a big step towards reaching the Champions League quarter-finals with a 2-0 win over Real Sociedad in the first leg of their last-16 tie on Wednesday.
Haaland scored his first goals since November in a 2-0 win over Everton on Saturday after spending two months on the sidelines due to a foot injury.
Star midfielder Jude Bellingham became the latest addition to the list, injuring his ankle in Saturday's 4-0 league win over Girona.
Copenhagen, who finished second in Group A ahead of Manchester United and Galatasaray, trailing only Bayern Munich, return to competitive action after a two-month winter break.
The England international, Madrid's top goalscorer with 20 strikes in 29 matches across all competitions, will miss the Champions League last 16 visit to RB Leipzig on Tuesday.