Sanchez has endured a rocky 11 months at Manchester United, scoring just four goals since joining from Arsenal in a straight swap deal involving Henrikh Mkhitaryan.
However, with Romelu Lukaku out injured, the Chile international has stepped up in recent times.
Alexis Sanchez impressed for United during their Premier League win over Bournemouth at the weekend and, despite being replaced against Juventus, caught the eye in Turin.
Wenger managed the 29-year-old at Arsenal, where the player enjoyed the best years of his career.
And the Frenchman, while admitting Sanchez has struggled, believes Jose Mourinho’s decision to take him out of the firing line a month ago has paid off.
“It is the question that he has raised with his performances,” Wenger said on BeIN Sport.
“I believe he has lost confidence.
“The strength of Alexis Sanchez is to take initiative, to dribble, to take people on.
“These kind of players are most vulnerable when they have no confidence anymore because their game is based on confidence and feeling free to take initiative.
“He has lost that slowly, even with the interruption of the season, since the start of the season he looks like he had a high level of energy that he has lost as well.
“Certainly, he is refreshed now because Mourinho left him out for a while and he has a good opportunity to get back to where he belongs, as a top player.”
Ian Wright, another Arsenal old boy, also thinks Sanchez could be set to turn a corner.
“I think he’s getting somewhere near what we know and I’d have been very disappointed being taken off after playing like that today,” he said after the Bournemouth game.
Sanchez could start when United face Manchester City on Sunday (4.30pm).
The Chile international nearly moved to the Etihad in January but ultimately chose Manchester United instead.
However, he impressed in the same fixture last season, helping United win 3-2.