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Italy dominated but needed a penalty shootout to overcome English at the Olympic Stadium Kiev after their Euro 2012 quarter-final ended in a 0-0 draw.
England's Ashley Young hit the crossbar and Ashley Cole had his effort saved by Gianluigi Buffon, as Alessandro Diamanti scored the final penalty to set the Azzurri up for a classic semi-final with Germany in Warsaw on Thursday (2.45am Friday WA time).
Italy won the penalty shoot-out 4-2 on Sunday.
It was a well-deserved win for Italy, who squandered plenty of chances, most notably with Daniele De Rossi hitting the post in the third minute and Mario Balotelli missing at least three good opportunities during regular time.
England rarely looked threatening and were lucky not to have conceded any goals, while Andrea Pirlo was the outstanding man for Italy at midfield.
"We played a great game and had deserved to win before the penalties, then we kept our cool and were lucky," Italy coach Cesare Prandelli said.
"They were a tough side to face, and that is why I say the boys did well to play with character and heart."
Germany are now the favourites, Prandelli said, "but for now let us enjoy this victory".
Despite less than stellar performances, England coach Roy Hodgson did not make any changes to the team that defeated Ukraine, with Wayne Rooney fielded behind Danny Welbeck.
Prandelli picked Manchester City striker Balotelli alongside Antonio Cassano up-front and replaced defender Giorgio Chiellini and midfielder Thiago Motta, who are both injured, with Leonardo Bonucci and Riccardo Montolivo.
The Italians had not lost against England for 15 years, with their last encounter at a major tournament ending 2-1 for the Azzurri at the 1990 World Cup.England, on the other hand, had been growing in confidence after entering the tournament with low expectations.But those expecting a tactical match by two defensive-minded teams were soon disappointed, with both sides facing each other openly.Late in the match and with the English players looking tired, Italy continued to press ahead during extra time.An Italy goal in the 114th by Nocerino was ruled out for off-side, and the game went to penalties.Balotelli, Pirlo - with a classy chipped shot - and Antonio Nocerino were all on target for the Italians, while Montolivo sent the ball wide, before Diamanti sealed the match.England had Steven Gerrard and Wayne Rooney on target but had to give up following Buffon's great save on Cole."We can go out with our head held high but it does not help the heartbreak," Gerrard said."I feel for the players as they have given absolutely everything today."I thought this time we might have a little bit of luck but it was not to be."The loss means England have exited major tournaments on penalties on six occasions - in 1990, 1996, 1998, 2004, 2006 and now 2012.The other semi-final sees title holders Spain take on Portugal on Wednesday (2.45am Thursday WA time).England's penalty shoot-out record at major tournaments2012 EC QF lost to Italy 4-2 after 0-0 draw