The Germany international is a surprise omission from Roberto Mancini???s list after starting all five games since arriving on loan from the Gunners last month.
UEFA regulations state that one of three new players entitled to be registered for the knockout stages can have previously played in a UEFA club competition group stage match for another club in the current season.
But rather than Podolski, who would therefore have been eligible despite playing for the Gunners in the Champions League group stage, Mancini has selected Xherdan Shaqiri, who represented Bayern Munich in that competition.
Dani Osvado, on loan at Inter from Southampton, was also left out of the 23.
But Davide Santon, who joined the club from Newcastle on Monday,??and George Puscas, who made his Serie A debut in last weekend’s 3-1 defeat to Sassuolo, do make the cut.