The 21-year-old has failed to establish himself at Stamford Bridge during his three years at senior level, making just 12 starts in all competitions.
Loftus-Cheek has featured heavily on loan at Crystal Palace this term, however, and further enhanced his reputation with a man-of-the-match display on his international debut against Germany on Friday night.
Southgate is delighted that Loftus-Cheek took his big chance to shine, but has challenged the Chelsea academy product to add some goals to his game.
"He has been able to battle through difficult spells at Chelsea, training with senior players who recognise his talent so get into him in training," he told reporters. "Have they kept him in his place? Yes, I imagine they probably saw the threat. This season going out and playing has helped him. In the early season I saw him and he showed flashes of what we saw against Germany.
"I think he can affect big matches like he did. I've known Ruben a long time - I think the first time I saw him was in an Under-16s international. I've had plenty of long conversations with him over the years about the areas he is really strong in and the areas he needs to develop. He can probably add a little bit more quality in the final third.
"He can probably go and score more goals given some of the attributes he has, but I was really pleased to see the effect he had and to get a performance like that. When you see his physical size, you think you'll see a certain type of player. Then I saw what you all saw against Germany - one that is so technically-gifted.
"He's at his best receiving the ball behind the opposition midfield, driving towards goal and sliding passes into people. He can take the ball under pressure too which is a great skill to have. He's an unassuming, quiet, polite kid. I hope he takes huge belief and confidence from that because he's shown what he is capable of."
Loftus-Cheek had 67 touches of the ball against Germany and ended the match with a 96% pass accuracy figure, completing 33 of his passes in the opposition half.