An undermanned Socceroos outfit performed creditably in Jeddah against already-qualified Saudi Arabia but were undone by Salem Al-Dawsari's second-half penalty in a 1-0 loss.
The defeat means Australia head into June's playoffs having won just one of their past seven qualifiers with speculation rife Arnold will be sacked before the sudden-death clash with the UAE.
The 58-year-old's position is sure to be reviewed by Football Australia after the disappointing form in recent games, which has included back-to-back defeats this international window and a chaotic build-up to last week's crucial match against Japan during which Arnold was fined for breaching COVID-19 isolation rules.
Former Socceroos defender and Melbourne Victory coach Tony Popovic has been touted as a possible successor if Arnold is axed, a decision ex-internationals Luke Wilkshire and Archie Thompson both believe has to happen.
"Is he getting the best out of the players? I don't know. I don't think so," Thompson told Network 10.
"It hasn't worked and it's not working still."
Wilkshire said a change of coach is needed to spark new energy into the campaign as Australia face a daunting play-off route.
If the Socceroos can get past the UAE on June 7, they'll then face South America's fifth-placed nation in a one-off match for a spot at Qatar 2022.
"We need a shift and we need a change to re-ignite us," Wilkshire told Network 10.
"There's a lot of questions being asked and not too many answers."
With several top names unavailable including Aaron Mooy, Tom Rogic, Milos Degenek, Jackson Irvine and Jamie Maclaren, Arnold gave debuts to Nathaniel Atkinson and substitute Nicholas D'Agostino while Denis Genreau and Bruno Fornaroli both started in their second appearances for the national team.
The visitors created the better chances in the opening half and believed they had taken the lead when Scottish-born winger Martin Boyle struck in the 36th minute.
A defence-splitting pass by Adjin Hrustic released Boyle who sprinted clear and rounded the Saudi goalkeeper before slotting home but his celebrations were cut short as the assistant referee flagged for offside.
After a four-minute long VAR review, the decision was upheld despite replays suggesting Boyle was very close to being onside as he started his run.
"We haven't seemed to get any VAR decisions the whole time," Arnold told Network 10.
"To be honest, I haven't seen it but I've heard it's very, very close.
"At the end of the day another pretty s*** penalty again and pretty disappointing."
Mabil fired a dangerous shot which had to be tipped over the bar in the second half but Australia's enterprise came unstuck when James Jeggo was penalised for a clumsy trip on Sami Al-Najei inside the box in the 62nd minute.
Al-Dawsari stepped up to send Mat Ryan the wrong way and give the hosts the lead.
Encouraged, the Green Falcons finished the game the stronger team and it was only a couple of smart saves from Ryan that denied the hosts a second goal.
The winner of the Australia-UAE clash will face Peru, South America's fifth-placed nation, for a spot at the World Cup.
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