The debate of introducing a player quota has resurfaced with Football Association chairman Greg Dyke launching a commission to look into the state of the national game.
Clubs bringing in players from abroad has long been cited as one of the main reasons why England have struggled on the international stage in recent years and Southgate believes stopping the amount of foreign players in the Championship would help develop home-grown talent.
"The great thing about the lower division is I think that should be a breeding ground for young English players," Southgate told The Sun.
"I can understand why the Premier League clubs want to bring in the best foreign players. But if foreign players are coming into the Championship they can't be the best because of the very nature of the league they are being brought to play in.
"There should be a strong emphasis on the Championship being English or British-based players.
"Would I like to see a quota introduced on overseas players? In the Championship yes.
"But I don't see that happening in terms of restricting work permits. Yet if they're in the Championship, they can't be of the highest level."