Despite recording a 2-0 win at Stade Louis II, the Gunners crashed out on away goals following their 3-1 defeat in the first leg at the Emirates.
Mertesacker feels Arsenal are not even close to challenging for Europe's premier club competition, while admitting they underestimated their Ligue 1 opponents in the first leg.
"Far," he told reporters when asked how close his side is to winning the Champions League. "When you get knocked out you are far away.
"It is the last 16 and Monaco were very underestimated but they deserved it by playing well in the first leg. We had one bad game and that was enough to get knocked out.
"In the first game, we lacked that mental level you need to compete at the highest level. That was missing. You could see in the second leg how good we are and how well organised we can be.
"We conceded that late goal in the first leg – that was the killer. We are frustrated with not going through and giving away that big chance to go to the quarter-final."
Arsene Wenger's side could still end the campaign with some silverware with an FA Cup semi-final against Reading on the horizon, while they remain in the hunt for a top-four berth in the Premier League.
And despite their exit from Europe, the 30-year-old believes a run of eight wins in nine will give them confidence heading into the final run-in.
"As you could see over the last few years, we always get the results, especially at the end of the season.
"That’s what we will try to do again. We have to look and see how far it takes us. There are a lot of teams involved, but we want to qualify directly for the Champions League. That is a big target.
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