Wenger made his claims after seeing his side held to a goalless draw at Villa Park in the Barclays Premier League last night.
It was a severe dent to the Gunners' title hopes, particularly with Chelsea overcoming Birmingham 3-0 at Stamford Bridge.
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Hide AdWenger said: "They stopped us from playing when we had the ball and when they had the ball. They played a very long ball game, closed us down and it was very difficult for us. Villa play a very efficient English game with long balls and (they are] very physical. They did it very well and are a good side when counter-attacking."
O'Neill was clearly upset when told of Wenger's remarks and said: "If that is what he saw tonight, well that is a ridiculous statement. He has made a few ridiculous statements in his time here (in England] and that is as good as any. That is an appalling insult."
Goals from Tim Cahill and on-loan American Landon Donovan – his first for Everton – secured a comfortable 2-0 win at Goodison Park and extended Sunderland's miserable run.
Cahill's seventh-minute header was added to by the Los Angeles Galaxy forward 11 minutes later. Even from that early point Everton were able to coast home as the Black Cats were left with just one win in their last 13 Barclays Premier League matches.
Sunderland's last league outing saw them hammered 7-2 at Chelsea. Steve Bruce's side have now conceded 18 goals in their last six top-flight fixtures and are just three points above the relegation zone.
Bruce, incidentally, dropped striker Kenwyne Jones to the bench after this week claiming he had been distracted by links with Liverpool.
Nikola Kalinic shrugged off his Carling Cup disappointment by scoring the winner in the 2-1 victory over Wigan to ease Blackburn's relegation worries.
Kalinic scored twice in Rovers' semi-final second-leg showdown at Aston Villa last Thursday, only to end up on the wrong end of the 6-4 scoreline.
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Hide AdBut after the Latics' new signing from Celtic, Gary Caldwell, had cancelled out a stunning strike from Morten Gamst Pedersen, Kalinic popped up 14 minutes from time with his sixth goal of the season, and first in the Premier League since his 6million summer move from Hajduk Split.
The result means Sam Allardyce's side, who have signed Turkey midfielder Yildiray Basturk from Stuttgart for the rest of the season, are now up to 11th and seven points clear of the drop zone.
As for Wigan, who had won their preceding two league matches, they are just two points off the bottom three and staring at a fight to beat the drop for the remainder of the season.