Iwobi signed for the Toffees on 8 August for an initial fee of £28m, which could rise to £34m with potential add-ons.
The 23-year-old has started his new life on Merseyside in impressive fashion, scoring twice in his first three games for Everton, headed goals against Lincoln in the Carabao Cup and Wolves in the Premier League.
The Nigeria international had been at Arsenal throughout his career, joining the club as a schoolboy, and Kanu believes this connection to the Gunners means Unai Emery should have kept hold of the midfielder.
‘I would say they made a mistake, 100 per cent, Why they let him go, I don’t know,’ Kanu told Goal.
‘He’s a boy who, in and out, is Arsenal. He always wanted to do his best for the club. He loves the club, but not only that he can play football.
‘What he brings week in, week out, the fans need to appreciate that.
‘I think he is still young and those are the type of people you want in the team, people who grew up here, who knows everything about the club and wants to die for the club.
‘He was one of them, so for us to lose him and to let him go, was a shock. I couldn’t really believe we did it, but that’s football.’
Another Nigerian legend has weighed in on Iwobi’s career move and Joseph Yobo also believes Arsenal’s loss is Everton’s gain, where he expects him to shine.
‘Everton is the perfect club for a brave player like Alex Iwobi and I know it’s the right step to becoming a great player,’ Yobo told BBC Sport.
‘The manager [Marco Silva] is building an amazing team and he believes so much in Alex to add him to his squad.
‘Already he has started well by scoring two headed goals and it’s just the beginning of bigger things to come.’