Podolski, 31, retired from global duty after his stunning strike helped Germany beat England 1-0 in Wednesday's friendly in Dortmund.
However, a lack of cutting edge saw Southgate's first match as permanent manager end in defeat as Lukas Podolski marked his final Germany appearance with a stunning victor to secure a 1-0 victory.
Adam Lallana hit the post and Dele Alli saw a shot blocked at point-blank range as England ruled the first half in a creative, threatening and energetic display.
Germany's first real effort at goal did not come until the 37th minute when Podolski took aim from distance but fired over the bar from just outside the area.
Podolski then broke the deadlock with what proved to be the victor with just over 20 minutes remaining as he weaved his way through to the edge of the area before unleashing a fantastic strike into the top corner.
Podolski tested England goalkeeper Joe Hart, while Eric Dier forced ter Stegen, in for injured Manuel Neuer, into a diving save on 52 minutes.
"The way it finished up was like in a film", said Podolski, who smashed home the winning goal on 69 minutes, then came off to thunderous applause with six minutes left.
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Furthermore, the FA revealed they are planning to host two showpiece Wembley friendly internationals in November provided England avoid the World Cup qualifier play-offs. I didn't ask the guys with Germany because Arsenal and Arsene Wenger have to make the decision. He'll certainly be hoping for some more clinical finishing in front of goal, especially from Vardy, who was kept relatively quiet against Germany. "We win 1-0 and I score the goal".
The 31-year-old on Wednesday boosted his goal total for Germany to 49 in 131 matches, including the side's triumphant 2014 FIFA World Cup campaign, reports Efe.
Southgate said: "I'm very pleased with what we learned, the manner of the performance".
" We've also got some intelligent footballers in there, and it's pleasing for me, because I think we needed that ability, and we showed it tonight. It's great for him", Germany coach Joachim Low said.
Meanwhile for England, Burnley's Michael Keane stepped into a three-man back line, and West Brom's Jake Livermore entered the midfield for manager Gareth Southgate, who was without the injured likes of Wayne Rooney and Harry Kane. We should have had the game won, really.
Many fans dusted off their Podolski jerseys for the game, while there was a good trade in Podolski scarves outside the stadium.