Seedorf, 31, said: "I have watched several Arsenal games this season and they've been outstanding. They're a young team but they are playing to a consistently high level. You'd have to say that on their best form they're the best team in Europe at the moment.
"Mind you, a few weeks will go by before our Champions League ties and you can't guarantee you'll still be in the same form then. A lot of things can change."
Seedorf has a proven track record as a winner in Europe but he admits his Milan side have been inconsistent this season.
He said: "We're the champions of Europe but we know we've not been at our best. We know we'll have to be at our best against Arsenal. We can't take any risks by letting our standards slip against them.
"We know how to handle the big occasions and the two leg ties.
That's the area where the Arsenal youngsters are still trying to find their way.
"And the fact that the second leg is in the San Siro definitely suits us.
Of course we'll need to get a decent result in London and Arsenal have a great record at their new home.
"But, with our experience in Europe, I'd back us to handle the situation and get through in Milan."