The Bundesliga giants are favourites to progress into the quarter-finals having knocked the Gunners out of the tournament twice in the past four seasons.
Bayern head into the first leg on the back of an 11-game unbeaten run in all competitions, but Ballack, who spent four years playing for the German club in his career, has claimed that Carlo Ancelotti's side are beatable.
"There is always a chance," Ballack told talkSPORT. "Arsenal is a great club with great players, but Bayern Munich seem to have been a little bit on another level over the last few years with the squad they have and the confidence they have, especially in this competition.
"In the Champions League they present absolute power and dominance and are always going to the semi-finals or final. It is really difficult for Arsenal with the history and bringing that out of the head having lost a few times against Bayern, but this is a new game.
"They have to believe in themselves - there is always a way to beat Bayern Munich."
On Tuesday night, Paris Saint-Germain stunned Barcelona with a 4-0 rout at Parc des Princes in the first leg of their last-16 tie.