Arsenal have won just two of their last nine league games, form that has seen them slip to fourth in the table after topping it for much of the campaign.
The Emirates Stadium outfit have not won a trophy since 2005 and are now relying on the FA Cup to break that drought, with a semi-final against champions Wigan Athletic at Wembley to come on Saturday.
Arsene Wenger's men were bundled out of the UEFA Champions League by Bayern Munich at the round of 16 stage this season and Spain midfielder Cazorla has earmarked Arsenal's mental fragility as the reason for their late-season slump.
Cazorla also urged the club to recruit strongly in the close-season, telling Sport 360: "Arsenal has everything to win.
"History, infrastructure, an incredible stadium and great players, but we have to improve at crucial moments and sign the best football players because if you don't do that, you may lag behind others.
"That is what makes it different at other clubs. You've a good example in Manchester City who signed Fernandinho, (Alvaro) Negredo, or even Manchester United with (Robin) van Persie and (Juan) Mata.
"Arsenal know what they need next season, but it's almost impossible to win a title if we haven't got these kind of things.
"We haven't got a winning mentality and we have to believe in ourselves. Sometimes you can get used to not fighting, but we can't do that. Arsenal is and will always be a historic football club and we have to look forward.
"We couldn't recover after going out against Bayern in the Champions League and the defeat against Stoke finished us (in the league). You can't lose against Stoke if you aspire to be the next champion."
Cazorla - who joined Arsenal from Malaga in 2012 - also hinted that he may leave the club in order to compete for titles.
"I want titles and that is why I came to Arsenal," he added. "Every football player wants to win titles. We've gone many years without winning one. And if not, what I'll look for in my next destination is to have the chance to win.
"When I'm turning 31 I'll evaluate myself and I'll choose the best option. In which case, I would be delighted to come back (to Spain)."
