The Gunners have regularly been out-muscled in the Premiership this term, but produced a stunning display to win 1-0 at Madrid in the first leg of their Champions League last 16 tie a fortnight ago.
Ljungberg believes the performance was partly down to Madrid preferring a technical approach to the game, something he expects will benefit the Gunners again in the return match.
"We have the quality to win the game and go through, but at the same time I have a lot of respect for Madrid. They are a great side, with great players," said the Sweden international.
"If we look at how Madrid have played in the past they are not as physical as some teams in England. I do not think they can play that type of game, really.
"But of course we know it is a big game and we need to stand up for it.
"Of course it is the results that are the important thing, but to get that we need to play well.
"If we sit back and try to defend against a team like Madrid that is not a good thing to do.
"We need to try to play our football and try to play a positive game, and defend well together.
"We need to go out and play the game we know we can play and hopefully we will get the result."
Full name: Karl Fredrik Ljungberg
Born: 16 April 1977, Vittsjö, SWEDEN
Weight: 11st 6lbs.
Club: Arsenal FC