"President Giancarlo Abete on Wednesday met with national coach Roberto Donadoni in the FIGC headquarters," read a brief statement on the FIGC website.
"In the course of the meeting, as already announced, they reviewed the work carried out in the last two years and how the European Championships had panned out.
"While confirming to Donadoni sincere personal admiration and appreciation for the reliability and skilled professional work which marked his time at the helm of the national side, president Abete also communicated to the coach the FIGC's decision not to renew the contract."
I don't have the foggiest idea what I will do in the future
The Azzurri were largely uninspiring at Euro 2008 yet did manage to qualify from the so-called 'Group of Death' which contained France, Holland and Romania.
A 3-0 defeat to the Dutch in the opening Group C game was followed by a 1-1 draw with Romania.
They squeezed through to the quarter-final stage after beating Les Bleus 2-0 but then lost on penalties to Spain and Donadoni paid the price.
The former Lecco and Livorno boss, who guided Italy to 13 wins, five draws and five losses, said he was pleased with what he had achieved as national coach.
"I'm sorry that a penalty kick has decided this situation," he told ANSA news agency.
"Over these last two years, my Italy also did something positive, and one last game can't erase that."
He added: "I don't have the foggiest idea what I will do in the future. I've got to digest this and then start anew."
Angelo Peruzzi, Italy's third goalkeeper at the World Cup, is likely to be named an assistant coach by Lippi, and former Italy defender Ciro Ferrara could also rejoin the staff.
This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.