They had all but qualified for the semi-final, where they will play hosts South Africa, ahead of Sunday's game.
Ramires had the first chance for Brazil, but fired against the outside of the post from a tight angle having been played in by the lively Fabiano.
Brazil forward Robinho then tested keeper Buffon with a low drive from 20-yards while at the other end Mauro Camoranesi struck a half-volley just over the bar.
But it was as close as Italy came with Brazil looking increasingly dangerous the longer the half went on.
Daniele De Rossi deflected Lucio's shot o nto his own post and behind and from the resulting corner Brazil's captain forced a fine close-range save from Buffon.
A minute later Brazil were in front with Fabiano finding the corner of the net from 12-yards out having been played onside by Italy captain Fabio Cannavaro.
Brazil will meet South Africa in the semi-finals
Cannavaro was winning his 126th cap for his country, equalling the record of AC Milan legend Paolo Maldini, but it was an otherwise forgettable night for the central defender.
Brazil doubled their lead when Fabiano dinked over the onrushing Buffon from close range and just before the break Dossena turned Robinho's low cross from the left into his own net for 3-0.
With Italy needing to get back into the game they started the second half brightly.
The lively Giuseppe Rossi soon forced a fine save from Cesar from 20-yards out. Moments later Alberto Gilardino went close for Italy flicking a near post cross towards goal with Cesar again reacting well to avert the danger.
Rossi then went close with a fierce long range drive that Cesar did well to beat out while at the other end Kaka curled the ball inches wide from the edge of the box as the game became increasingly stretched.
Kaka was just wide with a shot from the edge of the box and as news filtered through of the score in the Egypt-USA game, Italy knew time was running out for them.
De Rossi had Italy's last chance, but the striker blazed wide from the edge of the box to consign them to an early exit from the competition.
Italy: Buffon, Zambrotta, Cannavaro, Chiellini, Dossena, Camoranesi, Montolivo (Pepe 47), De Rossi, Pirlo, Iaquinta (Rossi 38), Toni (Gilardino 57). Subs Not Used: De Sanctis, Santon, Grosso, Legrottaglie, Gamberini, Gattuso, Palombo, Quagliarella, Amelia.
Booked: Chiellini, Dossena.
Brazil: Julio Cesar, Maicon, Lucio, Juan (Luisao 24), Andre Santos, Ramires (Josue 88), Silva (Kleberson 84), Felipe Melo, Luis Fabiano, Kaka, Robinho. Subs Not Used: Victor, Kleber, Dani Alves, Miranda, Elano, Julio Baptista, Alexandre Pato, Nilmar, Gomes.
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