The 23-year-old has impressed when fit in a season disrupted by injury, and Wenger believes Gibbs is in the top bracket of left backs in the Premier League.
"I think this season has been, despite the fact that he was in doubt for a while, a step up season for him," he told arsenal.com.
"He has improved a lot, has put his personality into the games, which was sometimes a bit of a problem for him. He has authority, he is decisive going forward, and in games where we were struggling a bit like Swansea in the cup he turned up and was the one who brought the pressure on the opponent.
"Even at Munich when he had been out for six weeks he came straight back in and had a very decent game. For me he has moved into the top three left backs in the country."