Napoli forward Insigne fired past Jack Butland in the 87th minute after the use of VAR had seen debutant James Tarkowski punished for a challenge on Italy subsitute Federico Chiesa.
Jamie Vardy capitalised on some swift thinking by Jesse Lingard to fire the hosts ahead in the 26th minute, and it seemed one goal would be enough for Gareth Southgate's side.
After a foul on Raheem Sterling, Lingard spotted the opportunity to take a quick free-kick, putting the ball down and re-starting play in a hurry to tee up his compatriot's seventh international goal.
Yet Italy scored for the first time in four outings thanks to the help of technology, referee Deniz Aytekin spotting Tarkowski had stood on Chiesa's foot inside the penalty area after viewing replays.
Butland dived the right way but was unable to keep out Insigne’s spot-kick as England saw a sixth successive clean sheet snatched from their grasp in the closing stages.
Still, the draw - following on from Friday's 1-0 win over Netherlands - will have given manager Southgate plenty of food for thought in his team's final outing before naming a provisional World Cup squad on May 14.
England, so assertive from the outset in Amsterdam, were initially sloppy on their return to action on home soil.
They were fortunate Ciro Immobile didn't make them pay too, the forward wasting two glorious chances in the early stages of Italy's first visit to Wembley since the redevelopment of the famous venue.
Prolific for Lazio this season, Immobile’s dallying when gifted a sight of goal saw his eventual attempt blocked by John Stones, who recovered to atone for his initial error after carelessly surrendering possession to the Italian.
If he could point to being under pressure on that occasion, there was no excuse for Immobile's failure to hit the target when picked out by Antonio Candreva’s teasing cross from the right.
In contrast, Vardy made no mistake when Lingard’s presence of mind created a clear sight of the target.
Having seen a low drive kept out by Gianluigi Donnarumma’s legs earlier in proceedings, the Leicester City player went high to break the deadlock, thumping a rising drive beyond Milan’s teenager goalkeeper.
The goal lifted England's performance, with the excellent Ashley Young seeing a first-time effort deflected wide before a marauding run early in the second half was stopped by Leonardo Bonucci's last-gasp block.
Alex Oxlade-Chamberlain fired straight at Donnarumma from the edge of the penalty area but, crucially, the hosts failed to get a second goal when firmly on top.
They appeared to have escaped when Insigne volleyed narrowly wide from Napoli team-mate Jorginho's chipped pass but was on target when referee Aytekin gave Italy a lifeline.
The penalty decision was a tough break for the otherwise impressive Tarkowski, who will now face a nervy wait to find out if he has done enough to make the cut for the tournament in Russia.
