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Arteta made six changes to his line-up for the fourth-round clash, starting with Declan Rice on the bench on his Hammers homecoming.
Rice, who lifted the Europa Conference League trophy as West Ham captain last season, was back at his old club for the first time since his £105million switch to the Gunners.
But he will not be getting his hands on the Carabao Cup this season after strikes from Mohammed Kudus and Jarrod Bowen, following an early own goal by Ben White, sent the north Londoners crashing out.
'I'm very disappointed,' said Gunners boss Arteta. 'I'm responsible for that, we're out of the cup, we wanted to play a very different game and compete.
Mikel Arteta took the blame for Arsenal 's painful 3-1 Carabao Cup defeat at West Ham
The Hammers ruined what was Declan Rice's (right) return to the London Stadium
'The game took a direction because of the first goal but we have to see much more from the team and earn the right to win.
'I'm disappointed with myself. We wanted to play in a different way and we weren't able to do that. Every time we lose the pain is there.
'We have to use this pain and this defeat to prepare the best way for Newcastle on Saturday.'
West Ham took the lead after 15 minutes when