In the first-half the brave Hammers withstood everything the Gunners threw at them before catching them on the break with two cool finishes. The first from man-of-the-match Nigel Reo-Coker and the second from in-form striker Bobby Zamora.
They were then stunned to go into the break with only a single goal lead after Thierry Henry pulled one back with his 151st league goal with only seconds remaining.
As Arsenal pressed for an equaliser in the second half Matthew Etherington popped up to fire home a decisive third for the Hammers.
Robert Pires’ late goal caused some panic in the Hammers defence but they were good enough to hold out for a famous victory over their local rivals.
Pardew admitted to Sky Sports, “We set our stall out and we rode our luck at times.
“We mixed it up a bit and got goals. It was a fantastic performance.
“Their back four hasn't played together and we knew we had to expose that, we were always going to threaten them.
“But they really terrorised us for the first ten minutes and we needed to be strong and our centre halves were immense tonight.
“To win at a blue-riband club like this is fantastic for us and we have to take some stuff from it," the Hammers boss said.
”You can see that we always look like we can score goals and I think, at any level of football, that gives you an advantage.”