The Malawi FA (FAM) confirmed on Monday that Chimodzi and assistant Jack Chamangwana had been sent on leave until their contracts expire next month. Chimodzi and Chamangwana are former national team stars as is Ernest Mtawali, who has been put in temporary charge of the Flames.
The FAM apologised to Malawians for the 2-1 weekend loss at Kamuzu Stadium in the country's commercial capital, Blantyre.
The association hopes to name a permanent coach by 1 August after considering local and foreign applicants.
Malawi are in Group L and the other match in that mini-league also produced a shock with Swaziland winning 2-1 away to 2015 Cup of Nations quarter-finalists Guinea.
Swaziland host Malawi in early September in matchday 2 and another loss for the Flames would almost certainly extinguish any chance of reaching the 2017 tournament in Gabon.
Only group winners are guaranteed finals places, with just the best two runners-up from the 12 four-team groups accompanying them.