Leicester scored late to cancel and early goal by Pierre-Emerick Aubameyang and force a draw during their tie at the Emirates.
The draw ended Arsenal’s winning ways and hand Leicester the best opportunity to join top European competitions next season.
It took crucial saves from Kasper Schmeichel to deny French striker Alexandre Lacazette two golden opportunities as well as Bukayo Saka.
Gabon striker Aubameyang netted his 20th goal of the season in the 25th minute to give Mikel Arteta hopes of a European slot come next season.
In the 75th minutes Eddie Nketiah was red carded following a high ball challenge against James Justine minutes after coming in as a substitute.
Demarai’s cross in the 84th minute led to Vardy’s goal that was followed by a VAR check for an offside before it was ruled in.
The goal sends Jamie Vardy to the top of goal scorer’s list in the EPL with 22 goals, two more above Arsenal’s Aubameyang.
The foxes dropped to position four with a point below Chelsea and four a drift of Manchester United who are at currentlt sitted at position five.
Arteta’s side settled for position seven with 50 points nine shy of their Tuesday night competitors Leicester.