Italy clinched a quarter-final meeting with Spain as they sent France crashing out of Euro 2008 with a deserved win.
France had a nightmare evening, losing key man Franck Ribery to a serious injury after only seven minutes.
Eric Abidal was then sent off after 25 minutes for fouling Luca Toni to give away a penalty, scored by Andrea Pirlo.
Thierry Henry deflected in Daniele De Rossi's 30-yard free-kick just past the hour as the world champions joined the group winners Holland in the quarters.
Raymond Domenech's side carried all the appearance of a spent force and their display will now surely herald a changing of the guard for a group of players that has enjoyed so much success.
Italy, in contrast, celebrated their recovery from an opening defeat against the Dutch to move into the last eight - although they will lose influential midfield pair Andrea Pirlo and Gennaro Gattuso through suspension.
Coach Roberto Donadoni was under huge pressure before the game, but the world champions delivered when it mattered and can now go forward with renewed optimism.
Italy dominated what was a calamitous first 45 minutes for France - and it was only the wayward finishing of Luca Toni that kept the scoreline respectable.
Toni set the tone for his display after only three minutes when he collected a long ball but pulled his shot hopelessly wide.
France needed all their big guns firing, and they suffered a desperate blow after seven minutes when key man Ribery collapsed as he challenged Gianluca Zambrotta and was stretchered off in agony.
Samir Nasri, a transfer target for Arsenal, came on as substitute but his evening was also short-lived as Italy continued to create opportunities at will.
Claude Makelele had smuggled Christian Panucci's header off the line before Italy deservedly went ahead after 25 minutes following another dreadful moment for France.
Abidal hauled down Toni as he raced in on goal, leaving referee Lubos Michel with no alternative other than to produce the red card.
Pirlo hammered home the spot-kick - and the unfortunate figure of Nasri was then hauled off as former Newcastle flop Jean-Alain Boumsong was introduced in a defensive re-shuffle.
An astonishing passage of play followed, with Italy carving out a succession of chances that were all wasted by Toni.
Toni was off target when well placed three times in the space of just two minutes, as France threatened to collapse under the weight of Italian pressure.
France finally had a half-chance after 33 minutes, but Henry pulled his finish across goal from Jeremy Toulalan's pass.
Italy ended the half in the ascendancy, with France keeper Gregory Coupet superbly turning Fabio Grosso's free-kick on to an upright.
France finally gathered their forces after the break, with Henry twice forcing Gianluigi Buffon into saves, albeit comfortable ones.
Hopes of a French revival were snuffed out after 62 minutes when De Rossi's 30-yard free-kick was deflected past Coupet by the outstretched foot of Henry.
Buffon had hardly been extended, but he produced a brilliant diving save from Karim Benzema's curling long-range shot.
Toni rounded off his night in typical fashion, crashing an opportunity against the outside of a post, but Italy's fans had been celebrating their triumph long before the final whistle.
France: Coupet, Clerc, Gallas, Abidal, Evra, Govou (Anelka 66), Toulalan, Makelele, Ribery (Nasri 10), Benzema, Henry, Nasri (Boumsong 26).
Subs Not Used: Mandanda, Frey, Vieira, Malouda, Thuram, Squillaci, Gomis, Sagnol, Diarra.
Sent Off: Abidal (24).
Booked: Evra, Govou, Boumsong, Henry.
Italy: Buffon, Zambrotta, Panucci, Chiellini, Grosso, Pirlo (Ambrosini 55), De Rossi, Gattuso (Aquilani 82), Toni, Perrotta (Camoranesi 64), Cassano.
Subs Not Used: Amelia, De Sanctis, Gamberini, Barzagli, Del Piero, Di Natale, Borriello, Quagliarella, Materazzi.
Booked: Chiellini, Pirlo, Gattuso.
Goals: Pirlo 25 pen, De Rossi 62.
Ref: Lubos Michel (Slovakia).