The Blues held a two-goal lead at half-time at Stamford Bridge but conceded twice in the second half to fall six points behind City and 13 in arrears of league leaders Manchester United.
Demba Ba opened his Premier League account for his new club when he produced a side scissor from the penalty spot on 25 minutes for his 14th of the season before Eden Hazard doubled the advantage on the stroke of half-time with a brilliant side-footed volley from the edge of the area.
However, just as it seemed the Blues were cruising, Southampton struck back when leading scorer Rickie Lambert nodded home Nathaniel Clyne's cross from the right to mark his 10th goal of the campaign prior to the hour-mark.
Chelsea will only have themselves to blame for the draw after leading by two goals and will be looking to show plenty of improvement at home next time out after losing to QPR and Swansea City and drawing with the Saints since their 8-0 rout of Aston Villa prior to Christmas.
Stamford Bridge, London - 34,484