The two sides cancelled each other out over 120 pulsating minutes in a 1-1 stalemate, but Marcus Rashford, Jadon Sancho and Bukayo Saka’s failure to convert from the spot ensured it was former City boss Roberto Mancini’s side who lifted the Henri Delauny trophy with a 3-2 penalty victory.
It was the cruellest finish for Gareth Southgate’s side after an absorbing final which had seen England roar into a second minute lead through Luke Shaw’s stunning strike only for Leonado Bonucci’s strike to level affairs after the break.
Italy also missed twice from the spot in the spot-kick shoot out with Jordan Pickford producing a superb save to deny Jorginho a potential winner.
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But once again penalties proved the Wembley nemesis for England in the European Championship showpiece.
Raheem Sterling, John Stones and Kyle Walker were all named in Gareth Southgate’s starting eleven once again but there was agony for Phil Foden with the City youngster ruled out by a foot injury picked up in training.
In what was England’s biggest national match in 55 years since the 1966 World Cup final, there was a pulsating atmosphere at Wembley with more than 60,000 fans present.
Manager Gareth Southgate made one change from the side that had beaten Denmark 2-1 in the semi-final, recalling Kieran Trippier in place of Bukayo Saka as England switched to a back three.
And the Three Lions further ignited the frenzied atmosphere as they made the perfect start, racing into a second minute lead through left back Luke Shaw in what was the quickest-ever goal in a European Championship final.
An overlap by Walker on the right flank gave Trippier the time to pick out the advancing Shaw with a superb, inviting cross.
And from 15 yards out, the left back made the sweetest of strikes with a volley to beat Italian keeper Gianluigi Donnarumma via the inside post for his first-ever international goal.
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It was no less than the hosts deserved and amidst a typically English downpour, only a timely stop by Leonardo Bonucci prevented Raheem Sterling latching onto a give and go from Mason Mount as England sought to press home their advantage in what was a hugely impressive first 30 minutes.
However, the Italians - managed by former City boss Roberto Mancini - sought to summon up a response as they grew into the game with their movement and passing stepping up a gear.
The dangerous Federico Chiesa was only a fraction wide with a low 20-yard shot after Declan Rice had been dispossessed before John Stones made a vital block to stop a goal-bound Immobile effort in first half injury time.
There was more danger early after the restart with Italy awarded a free-kick in an inviting central position just outside the box but, to England’s relief, Lorenzo Insigne’s set-piece was wide.
The Italian pressure was now relentless, and Jordan Pickford was then called into action to produce a fine low save to prevent Chiesa drawing Mancini’s men level after he had danced his way past three English defenders in the box.
At the other end, Donnarumma was then alert to parry over a Stones header from Mount’s corner.
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But the momentum was with Italy with space and danger ever present and it came as no surprise when they finally drew level on 67 minutes.
Pickford performed wonders to turn a Verrati header onto the post but Bonucci was alert and first to react, bundling home the rebound from three yards to send the Italian fans into ecstasy.
With the Blue tide looking increasingly irresistible, the Azzurri were then a whisker away from taking the lead when substitute Domenico Beradi sprang the offside trap but sent a 15-yard volley a fraction over as he beat the advancing Jordan Pickford.
With the tension almost unbearable England managed to stand their ground in a fraught final 10 minutes to take a gripping contest into extra time.
Kalvin Phillips saw a dipping 20-yard volley arrow narrowly wide as both sides stretched every sinew in search of a decisive goal.
There was then panic at the other end before Pickford came out smartly to deny Bernadeschi after Emerson had evaded Walker’s tackle and floated in a teasing cross.
The action tilted one then the other as first Pickford gather Bernadeschi’s free-kick at the second attempt before Stones was a fraction away from meeting Kane’s dangerous cross.
However, with both sides clearing their respective benches the game felt fated to be decided by a penalty shoot-out and so it proved.
With the pressure exerting the maximum demand, Belotti and Jorginho both failed from the spot but with the tension almost unbearable, England substitutes Rashford, Sancho and Saka all failed to convert and it was Italy who secured the trophy.
For Italy and Mancini the spoils, for England the 55-year wait goes on.
