Four years ago, Walcott was selected for England's World Cup squad before he played a first-team match for Arsenal.
However his prospects of earning a place on the trip for the finals in South Africa this summer may have diminished after his underwhelming display at Wembley.
Waddle has serious concerns about Walcott's development, and the 49-year-old former England winger, who won 62 caps and helped Bobby Robson's team reach the 1990 World Cup semi-finals, criticised the young Gunner's knowledge of how to fill a wide role.
"People keep saying he's young but Wayne Rooney understood the game at 16, 17," Waddle said.
"I've never seen any difference in Theo Walcott since he was at Southampton and broke into the team at a very young age.
"I've never seen him develop. He just doesn't understand the game for me - where to be running, when to run inside a full-back, (when to) just play a one-two."
Speaking on BBC Radio Five Live, Waddle said: "It's all off the cuff.
"The ball comes to him and if he gets a good first touch, he might be on his way if he shows pace. But he has a plan in his mind before the ball comes to him. He's not looking as if to think, 'This is where I want to be, this is where I want to go, and this is what I'm going to do'.
"It just seems to be all off the cuff.
"People keep saying to me, 'Oh he's young and he'll learn'.
"I keep thinking, 'Fabregas has learnt and he's young, Rooney has learnt. they all read the game so well'.
"I just don't think he's got a football brain and he's going to have problems.
"Eventually he could play up front but would he know where to run? Let's be honest, good defenders would catch him offside every time.
"I just don't know whether he studies the game, learns the game, or what. He's at a great club where they play fantastic football week-in, week-out, and I'm just surprised he's never developed his game."
Waddle was baffled as to why Fabio Capello picked Walcott on Wednesday, citing his lack of action for Arsenal this season, and suggesting his hat-trick in World Cup qualifying against Croatia was a blip.
"I'm surprised Walcott was in the squad," Waddle said.
"He doesn't play a lot of football, he hasn't done anything. he hasn't done anything for a long time and I think Croatia was a one-off.
"I just think he's got a lot to learn. I've been more impressed by Adam Johnson at Manchester City than Theo Walcott."
Waddle's assessment was backed up by former England boss Graham Taylor, who said: "I'm not going to be in any disagreement at all.
"I haven't seen the improvement of Theo Walcott in terms of what Chris is saying of reading the game. I just haven't seen it.
"I just see a problem there."