Although Arsenal had already qualified for the last 16, Arsene Wenger's side desperately needed a victory in Athens to ease a growing sense of crisis surrounding the English Premier League side after their worst start to a season in his 16-year reign.
Instead they squandered a lead secured by Tomas Rosicky as second half goals from Giannis Maniatis and then Kostas Mitroglou left Arsenal second in the group behind Schalke, who drew with Montpellier.
It was the last thing Wenger needed after being subjected to a torrent of abuse from angry fans after Saturday's 2-0 home defeat against Swansea.
"For their first goal, it was a goal kick not a corner, simple as that," Wenger said after the match.
"I don't think it was the right decision, but we have to cope with it. After that they scored a good goal.
"We had a good first half but dropped physically in the second. Many of the players are not used to that level.
"We had two or three chances to score a second but after that we know we can be in trouble.
"We have to wait for the draw but ideally you would want to finish first."
Wenger deployed a weakened team including forgotten men Marouane Chamakh and Sebastien Squillaci, along with a first start for 20-year-old left-back Jernade Meade.
Aaron Ramsey should have opened the scoring when Chamakh nodded Oxlade-Chamberlain's cross into the Welsh midfielder's path, but he completely miscued his shot and the ball bounced out of play off his shin.
Leonardo Jardim's side almost made Arsenal pay moments later when Pablo Contreras's header was cleared off the line by Rosicky.
Arsenal eventually took the lead in the 38th minute, with Gervinho snaking past several defenders before cutting the ball back to Rosicky, who drove a first-time shot past former Manchester United keeper Roy Carroll for his first goal since March.
An injury forced Wenger to substitute Rosicky for Andrey Arshavin at half-time and Russian was into the action early on as he headed over from Chamakh's cross.
Arshavin went close on the hour with a powerful strike that Carroll pushed away at his near post, but Arsenal's defensive frailties returned to haunt them as Olympiakos snatched an equaliser in the 65th minute.
There was a hint of controversy about the goal as Arsenal claimed Szczesny didn't get a touch on a Paulo Machado header which resulted in the corner that produced the goal.
Arsenal failed to clear the set-piece and Djamel Abdoun hooked a cross back into the area, where Ramsey carelessly chested the ball towards Maniatis and the midfielder bundled his close-range shot past Szczesny.
It got even worse for the Gunners eight minutes later when the Wenger's defence backed off too far, allowing substitute Mitroglou to curl a superb strike past Szczesny from the edge of the area.