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 half-time.
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.
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.
Ilkay Guendogan, partnering Khedira as holding midfielder in the absence of Bastian Schweinsteiger, curled in a left-footed shot five minutes later to cut the deficit.
Thomas Mueller controlled a deep pin-point cross to level in the 31st as Germany looked to finally take control.
But another defensive misunderstanding left Samudio alone and unmarked for way too long at the far post to score again in first half stoppage time with only Paraguay's fourth shot on goal.
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.