Hudson-Odoi turned down the chance to take part in Lee Carsley's first camp as Under-21s head coach last month, opting instead to continue working at his club to win a place under Thomas Tuchel.
Tuchel admitted the 20-year-old is frustrated by his lack of playing time but questioned the decision not to play for the Under-21s, adding that he will "deal with the consequences" of his choice.
Hudson-Odoi has earned three senior England caps under Southgate, most recently against Kosovo in November 2019, but is still able to switch allegiances and represent Ghana.
Southgate said that Hudson-Odoi faces a challenge to win a regular starting spot at Chelsea but is monitoring the winger's situation and believes that he still has a route back into the international senior set-up.
"I think Callum was in the team at Chelsea at a time when we felt he was pushing for a place in our squad," the England manager said.
"The club form often dictates some of those opportunities and he had a really bad injury of course, which put him out of the running for a long period of time.
"It’s always difficult for a young player when you’ve been with the seniors and then you’re not with the seniors to make that climb back, but that’s the challenge for him.
"At his club at the moment it looks as though he’s going to play in certain matches as a wing-back and it’s going to be more challenging to get in that front three at Chelsea now that Lukaku is there as well, so I think the Under-21s can be an important part of his development."
Borussia Dortmund were interested in signing Hudson-Odoi on loan during the final days of the summer transfer window but he ultimately remained at Stamford Bridge.
"There was probably a lot going on for him at the moment around that September transfer window as well, in that period," Southgate said.
"So without having had the conversation – Cars [Carsley] has been dealing with that, John McDermott [the Football Association's technical director] – I am fully aware of it."
"We are tracking Callum, he’s a player we know can be a top player and he’s still so young. He’s part of that 2000 age group who still have huge possibilities ahead of them."
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