Mikel Arteta’s side beat Manchester United in dramatic fashion on Sunday to maintain the gap following City’s win over Wolves earlier in the day.
Still, Neville – who has frequently backed City to win a third straight title – stressed Guardiola’s side are capable of the kind of winning runs Arsenal simply cannot muster, even despite the fact only four other teams have won 50 points at this stage of the season before.
“I don’t see them going on to win the League,” Neville told Sky Sports.
“I think Manchester City will win the League because I think what they’ve got in them is a special run.
“I think that at a point in the season Arsenal will lose one or two matches and City will be right on their shoulders and it’ll become very difficult for them.
“But they could win the League and, to be honest with you, I thought they’d be nowhere near.
“I can’t believe they’re in the chat. The fact they’re in the chat of winning the League is incredible, so it’s not a negative thing for me to say.”
City hold the longest winning streak in Premier League history – 18 games - amassed during the 2017/18 season.
Pep Guardiola, however, has himself admitted his team have little chance of catching Arsenal based on current form, calling for major changes in their mentality.
The two sides do not meet until February 15, though Guardiola has consistently proven rather downbeat on their chances of overtaking the leaders.