Ledley King marked his full England debut with a goal in a creditable draw.
Spurs defender King stole on to David Beckham's free-kick at the far post to put England ahead from close range two minutes after half time.
Portugal levelled with Pauleta's stunning free-kick from 20 yards after 70 minutes to peg England back.
Michael Owen and substitute Joe Cole missed the best chances for England, who lost Arsenal's Ashley Cole with a back injury after only 17 minutes.
England coach Sven-Goran Eriksson gave a first start to King in a reshuffled defence which was tested early on by the probing Portuguese style.
It was to prove a brief and eventful encounter for Arsenal defender Cole, who was replaced by Wayne Bridge early on as he struggled with a back strain.
This came after he almost handed Luis Figo the goal he was seeking to crown his 100th cap when he sent a tame header straight to the Real Madrid star, but England goalkeeper David James made a fine stop.
Figo was only narrowly off target after 22 minutes when his dipping free-kick was only inches wide with James beaten.
46 mins: Ledley King puts England ahead
69 mins: Pauleta equalises with a free-kick
England's approach play was neat, but clear-cut chances were few and far between.
Owen had the best opportunity of the first half when he was played in by Paul Scholes, only to scoop his finish over the bar from 12 yards.
And Everton's Wayne Rooney was also frustrated by an offside flag as he broke clear on to Frank Lampard's pass on the stroke of the interval.
England coach Eriksson made three substitutions at half time, sendings on Danny Mills, Kieron Dyer and Joe Cole for Scholes, Lampard and Phil Neville.
England were in front in the 47th minute when King bundled home a debut goal at the far post from Beckham's free-kick.
But James almost gifted Portugal an instant equaliser when he inexplicably dropped the ball inside the area and was rescued by Gareth Southgate.
Bridge almost extended England's lead after 53 minutes when he ignored the claims of the unmarked Owen to blaze across the face of the area.
Portugal drew level in controversial circumstances with 20 minutes left when they were awarded a free-kick as substitute Deco appeared to handle as Nicky Butt challenged Luis Boa Morte.
Pauleta punished England when he stepped up and delivered a stunning strike into the top corner with James helpless.
England had a clear opportunity to regain their lead after 78 minutes when Joe Cole was set up by Dyer, but Portugal's keeper Ricardo blocked with his legs.
Portugal: Ricardo, Paulo Ferreira (Miguel 46), Rui Jorge,
Andrade (Ricardo Carvalho 75), Couto (Beto 83),
Costinha (Deco 46), Figo (Boa Morte 66), Petit (Viana 83),
Pauleta (Hugo Almeida 78), Rui Costa (Tiago 61),
Simao (Ronaldo 46), Nuno Valente (Nuno Valente 46).
Subs Not Used: Quim.
England: James, Phil Neville (Mills 46),
Ashley Cole (Bridge 17), King, Southgate, Butt (Carragher 86),
Beckham (Jenas 86), Lampard (Joe Cole 46), Scholes (Dyer 46),
Owen (Heskey 71), Rooney (Smith 71), Bridge (Hargreaves 86).
Subs Not Used: Robinson, Kirkland.
Referee: Viktor Kassai (Hungary).