Germany's eye-popping abundance of talent in midfield was clearly obvious as the hosts carved out a dozen clear scoring chances but their backline was leaking badly in the first half, letting in three goals.
Goals from Ilkay Guendogan and Thomas Mueller cancelled out Paraguay's surprise 2-0 lead and Lars Bender levelled late in the game after Miguel Samudio had again put the visitors ahead on the stroke of halftime.
Germany, top of World Cup qualifying Group C with 16 points from six games, host Austria, five points behind, on September 6 before travelling to the Faroe Islands four days later. Sweden and Ireland also have 11 points.
"This performance came at the right time because there is no way we can play like that against Austria," Germany keeper Manuel Neuer told reporters.
The German defence was caught napping at the start with Jose Ariel Nunez latching on to a deep cross and easing past central defender Mats Hummels to beat keeper Manuel Neuer in the eighth minute.
The visitors silenced the crowd five minutes later when Wilson Pittoni drilled home a well-timed shot after Germany midfielder Sami Khedira's miscued clearance outside the box.
Ilkay Guendogan, partnering Khedira as holding midfielder in the absence of Bastian Schweinsteiger, curled in a left-foot shot five minutes later to cut the deficit.
Mueller controlled a deep pin-point cross to level in the 31st as Germany looked to finally take control.
DEFENSIVE MIXUP
But another defensive misunderstanding left Samudio alone and unmarked at the far post to score again in first-half stoppage time with only Paraguay's fourth shot on goal.
"We had concentration lapses and made big mistakes in the first 15 minutes," Germany coach Joachim Loew told reporters.
"We were badly organised in the first half, we gave away far too much space and made huge errors."
"It is clear some players are lacking freshness and match practice. It is the start of the season. We will not play like that. We will improve as we always do in September and October."
German central defender Jerome Boateng was brought in for Per Mertesacker in the second half and the Bayern Munich players combined well with Hummels to help settle nerves at the back.
The hosts, however, needed a long-range effort from substitute Bender to break Paraguay's resistance in the 75th after a one-sided second half with the South Americans boxed in.
It was a successful debut for Paraguay coach Victor Genes, previously in charge of the under-20 team, who replaced Gerardo Pelusso after he quit following a home loss to Chile in June in a World Cup qualifier.
Genes is Paraguay's third coach since Gerardo Martino, now at Barcelona, left after leading them to the final of the 2011 Copa America.
"This is a young team, starting now and gaining experience. So it is great to get a result like that," said Paraguay captain Roque Santa Cruz.
"Germany are one of the world's best teams, one of the favourites for the World Cup and obviously such a result is a big one for us."
(Reporting by Karolos Grohmann; Editing by Ed Osmond)
