After escaping relegation, Sherwood brought Villa to Wembley looking to win the FA Cup for the first time since 1957, but left in dejection following a 4-0 hammering
It was the biggest margin of victory in an FA Cup final for 21 years and one that the Villa boss found hard to take.
"I feel sick and so do the boys in there," Sherwood said.
"You can only know how good winning feels when you have to walk around watching a team hold the cup.
"They deserved to win the game, no arguments about that
It was quite obvious that they had their own way today and dominated the match.
"They have got outstanding world-class footballers and we couldn't nullify their threat or impose ourselves
We were outplayed by a far better team."
After being appointed in February, Sherwood dragged Villa out of the relegation zone to safety with one match to spare.
But the Midlanders ended the campaign with back-to-back defeats to Southampton and Burnley, and on Saturday they were completely outplayed by an irresistible Arsenal display.
Sherwood's plan to attack Arsenal failed as they dominated from the first whistle to last.
"I didn't try to stop them," Sherwood said.
"I tried to impose ourselves
I played the way I thought best suited the group we had and unfortunately it wasn't good enough."
After only just avoiding relegation, Sherwood says there will be wholesale changes to the squad this summer.
The former Tottenham manager has already told some players they are surplus to requirements.
"There will be a few changes," he added.
"Some of the boys have already been told they won't be here next year or they can find another club
I like to be honest with them.
"A team that escaped relegation for the last four seasons is not good enough for a club like Aston Villa
We need to add to the group and we need to get better."
One man Sherwood wants to keep is striker Christian Benteke.
He finished the season with 12 goals in his final 13 matches and although he failed to perform at Wembley, the Belgian is sure to be in demand this summer.
The striker, who has a "substantial" release clause in his contract, was disappointed to miss out on silverware and a chance to play in Europe next season.
"I think it's a big disappointment for anyone
When you play a final you come with a lot of hope," Benteke told AVTV.
"But Arsenal deserved to win.
"It's a sad day for the players and for the fans.
"We have to look ahead to next season.
"I would like to thank (the fans), throughout the season we had some hard times
It wasn't the result we hoped for.
"Next season we will try to do better.
"If you want to take something positive it's the fact that we are safe
We can look forward and try to build something strong."
Source : PA
Source: PA