Alexis Sanchez opened the scoring early on before wrapping up the win with a cute finish in stoppage time, ending an unbeaten run for the Three Lions that stretched back to November 2012.
Lampard, who made his 103rd appearance and was presented with his golden cap, has rejected notions that England has been dealt a reality check but conceded that there is work to do ahead of next summer's tournament in Brazil.
"We are very aware of the job in hand," the 35-year-old midfielder told the Football Association's official website. "We are not on the moon and we are not terrible – we are somewhere in between. We have got a long way to go.
“We need to concentrate on what we are doing, we have got another game against top class opposition on Tuesday [against Germany] and we need to improve.”
Lampard was keen to praise Chile afterwards and, despite the defeat, was pleased to test himself against a different style of opponent.
“They are a good team first and foremost. We knew that coming in to the game. It is a different style to what we have been playing recently,” the Chelsea ace added. “It was a great exercise for us. Nobody wants to lose a game. They scored early and late, and we had quite a few chances in the middle.
"It is one we need to take the positives out of going forward, we created some good stuff at times.”