The Three Lions will go head-to-head with John Toshack’s side in Group G, along with Switzerland, Bulgaria and Montenegro.
Scotland were paired with holders Spain, while Northern Ireland take on current world champions Italy. The Republic of Ireland face Russia and Slovakia.
But despite avoiding the trickier second seed sides such as Serbia, Sweden and Turkey, Capello insists his side have been drawn in one of the two toughest groups.
Switzerland topped their group to qualify for this summer’s World Cup and are ranked 18th in the world, while Bulgaria are 30th and Montenegro 72nd.
“All four opponents are really dangerous,” Capello said at the draw in Warsaw. “Wales will be my first derby as manager of an international team. It will be interesting. They are really young but the value of the players is high.
Switzerland qualified for the World Cup, they are one of the best teams. I
remember when I played against them it was not easy to win away.
“I have big confidence in my team and I am sure we will play a fantastic qualifying tournament for 2012.”
Wales boss Toshack raved: “We like nothing better than another chance against the old enemy.”
EURO 2012 | QUALIFYING draw
GROUP A: Germany, Turkey, Austria, Belgium, Kazakhstan, Azerbaijan,
GROUP B: Russia, Slovakia, REPUBLIC OF IRELAND, Macedonia, Armenia, Andorra
GROUP C: Italy, Serbia, NORTHERN IRELAND, Slovenia, Estonia, Faroe Islands
GROUP D: France, Romania, Bosnia, Belarus, Albania, Luxembourg
GROUP E: Netherlands, Sweden, Finland, Hungary, Moldova, San Marino
GROUP F: Croatia, Greece, Israel, Latvia, Georgia, Malta
GROUP G: ENGLAND, Switzerland, Bulgaria, WALES, Montenegro
GROUP H: Portugal, Denmark, Norway, Cyprus, Iceland
GROUP I: Spain, Czech Republic, SCOTLAND, Lithuania, Liechtenstein