The midfielder, who tore his ACL in January, was named on the bench for the Gunners' 2-0 win over Sunderland earlier today, but did not feature in the game.
The manager told reporters: "He is fit but lacks competition. Physically, he lacks contact in games and competition. Fitness-wise, there are no problems at all."
Walcott made his return to action in an Under-21s match against Blackburn Rovers earlier this month.