During the draw in Monaco, The Gunners were also drawn in a tricky looking Group A, with Swiss champions FC Basel and Bulgarian First League winners PFC Ludogorets Razgrad.
The group stages begin on 13/14 of September.
Sitting in Pot 2 in their 19th consecutive competition, Arsenal were nervously watching on as FC Barcelona, Real Madrid, Juventus and once again Bayern Munich awaited in Pot 1. It was however PSG who were drawn with Arsene Wenger's men.
Parisiens will prove tough test
As losing Champions League quarter-finalists in the last two seasons, Les Rouge-et-Bleu are also into their fifth season as reigning Ligue 1 champions.
With Unai Emery taking the reigns in Paris after departing Europe-League dominant Sevilla FC in the summer, the French club will be looking for the incoming Spaniard to replicate his three-successive Europe League wins onto Europe's top dining table.
In their opening two games of the 2016/17 campaign, Emery's men have won on both occasions and are yet to concede a goal.
Arsene Wenger's men will have to contend with a hugely dynamic PSG side who with Ángel di Maria, Thiago Silva and Edinson Cavani already in their ranks, have added former Premier League outcast Hatem Ben Arfa, Unai Emery's engine room at Sevilla, Grzegorz Krychowiak and forward Jesé Rodriguez from Los Blancos.
It will be the first time both sides will have met in the Champions League.
Swiss and Bulgarian champions also lie in wait
As is the case for Group A's other constituents. Basel have been Swiss Super League winners for the last seven seasons.
After Granit Xhaka's move to The Emirates over the summer, the midfielder is set to be reunited with his big brother Taulant at Basel. Mohamed Elneny is also set for a reunion with the club he departed just eight months ago.
Arsenal's opponents from Pot 4 are Ludogorets Razgrad. In their second season in the competition, the Bulgarian minnows will be keen to build on their experience of two years ago, as the Ludogorets Arena will produce a partisan atmosphere with a capacity of under 9,000.