Azzurra edged out Team Origin in the final race of the Louis Vuitton Trophy semi-final to win 2-1 in Nice.
Francesco Bruni led the Italians to a 29-second victory against Ben Ainslie and the British America’s Cup team.
Ainslie dominated Bruni and Azzurra in fresh winds on Friday but the Italians fared better in Saturday’s 10-knot breeze and flat water.
Azzurra will now meet Team New Zealand in the final after the Kiwis beat Russia’s Synergy 1-0.
Team Origin also lost to Synergy in the petit final to finish the event in fourth place.
“Reflecting on the whole regatta we have come such a long way through this event,” said Ainslie.
“We are disappointed not to be in the finals but we still performed really well as a team. For us it is all about building for the future so in that respect this event has been fantastic for us. We are looking forward to Auckland in March next year for sure.”
Sir Keith Mills, boss of Team Origin, who rode on board as 18th man, said: “It was a close one, but not to be for us.
“A great competitor in Azzurra, they are well practised and a team that knows the Mediterranean really well.”
Azzurra beat Team Origin by one minute 34 seconds in Thursday’s first race in the best-of-three semi-finals, but the British outfit then won by two minutes 29 seconds to level the match.
In the second semi-final, beat Synergy by four minutes to reach the final after penalties on Friday docked both teams a point to reduce the score to 0-0 with one race left.