Schalke (10 points), coached by Felix Magath who led Wolfsburg to the title last season, are one point ahead in third place.
"I can deal with the reunion but not the defeat," Magath told reporters. "We had three, four, five chances but the champions were far more effective.
"Maybe my team is a bit inexperienced."
Wolfsburg, on a high following their maiden Champions League win over CSKA Moscow in midweek, could have taken the lead with the last shot of the first half when Christian Gentner fired a close-range effort against keeper Manuel Neuer.
Dzeko then scored against the run of play, heading in a 55th-minute corner at the far post.
CHANCES MISSED
Schalke pushed forward and were lucky not to concede a second goal when defender Marcelo Bordon cleared a Marcel Schaefer effort off the line.
Brazilian playmaker Rafinha and Georgian Levan Kenia missed chances for Schalke before the home team levelled in the 80th minute when 21-year-old Benedikt Hoewedes headed in a corner.
Their celebrations were shortlived though as Dzeko fired the winner from eight metres a minute later to end Wolfsburg's run of three consecutive defeats.
Two minutes later Schalke went desperately close to an equaliser when a header by Kevin Kuranyi bounced off the post and on to the knee of keeper Andre Lenz, standing in for the suspended Diego Benaglio.
Schalke protested the ball had crossed the line but the referee waved play on.
"We did a good enough job but we should have taken the lead earlier," said Wolfsburg coach Armin Veh.
"Schalke fought until the end."
Leaders Hamburg SV, with 13 points from five games, visit Eintracht Frankfurt on Sunday.
