The 19-year-old midfielder has taken in just two outings for the Blues this season, with both of those coming off the bench.
He was introduced late on in a Community Shield clash with Liverpool, before then seeing 10 minutes towards the end of a 5-0 victory over West Ham on the Premier League’s opening weekend.
Foden, who is held in high regard at the Etihad Stadium and by those in the England national team set-up, has not been seen since.
It has been suggested that he may require a move, possibly a short-term loan, in order to find the game time he needs to unlock his full potential at domestic and international level.
Ex-England winger Waddle is not convinced that a switch would be the solution, but concedes that something needs to be done if a highly-rated prospect is to avoid stagnating.
“Where is Phil Foden? It is a mystery to me,” Waddle told BBC Sport.
“England can win Euro 2020 next summer and Manchester City's teenage midfielder should be in Gareth Southgate's side to help them try.
“If he was playing regularly for City in the Premier League, then he would be doing the same for England. I have no doubt about that. At 19, he is good enough to do both - he is that special. As well as his ability on the ball, what I really like about Foden is that he gets in the box.
“But he appears to be stuck on the fringes of City's first team and we are left to wonder why he is not getting any game time this season while his manager Pep Guardiola tells everyone he is the most talented player he has ever seen.
“It does not add up. I am not saying that Foden must leave City, far from it. But I am thinking of his development, and something needs to change.
“He needs to be playing top-level football now, and he should be asking Guardiola why he isn't giving him any if he rates him so highly.
“If I were him, I would be kicking Guardiola's door down, saying: 'Look, I need to play because I am missing out on so many opportunities here.'”
Waddle added on the challenges facing Foden in a squad which swept to an unprecedented domestic treble last season: “Of course, I can understand why Foden is not playing much. City have got so many star names and big hitters who are playing well, so Foden faces a battle just to get on the pitch ahead of Kevin De Bruyne, David Silva or Bernardo Silva.
“Chelsea's emerging players are in a different situation because of their club's transfer embargo, but Foden must have seen Blues forward Mason Mount come on in England's past two Euro 2020 qualifiers and thought: 'That should have been me.'
“Foden has still shown us his talent when he has played for the England Under-21 team - look at the goals he scored this month - but that is the only platform he has had.
“It has meant he has fallen behind Mount in the pecking order, and there are probably four or five players ahead of him for a place in the senior squad right now.
“That is not going to change while he is a bit-part player at City.”
While disappointed for Foden at present, Waddle admits that a door could be opening for the youngster at City as an iconic playmaker prepares to depart.
He added: “Foden is seen by many as being the natural successor to David Silva, who is leaving City at the end of the season, and it could be that Guardiola has told him that he will eventually get his place.
“But that does not help him now, and it is not enough to just say he is one for the future any more.
“Football does not work like that and if Foden does not do something about his situation, the season will go very quickly. He could end up wasting it.”