The Englishman, who has just signed a new contract, says Arsenal are suffering from a lack of confidence.
"I think there's a lack of belief as to how good we can be," said Walcott. "We've got some very, very good players here. I think players don't believe they are good enough at times. But, trust me, I see them every day in training and they should believe that.
"We've got a great bunch here, a great manager and he always puts it upon himself which is hard because we are the players out there every week. We try to win for him: we need to win for him because he's been very helpful for us young players coming through.
"We need to start realising how good we are. We showed some great stuff in the second half at Chelsea, but it's time we did that from the start. In that first half we were too slow, too sloppy closing down and we've got to show more commitment."