The 23-year-old has endured an injury-hit Gunners career but has still managed to impress this season despite competition for his position from January signing Nacho Monreal.
However, Wenger feels that Gibbs is showing his development and will continue to get better.
"I think this season has been, despite the fact that he was in doubt for a while, a step up season for him," Wenger told the club's official website.
"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."
Gibbs has made 28 appearances for Arsenal this season.