Mattia Mustacchio celebrates the crucial goal for Italy Under-21 against Wales
Wales Under-21 agonisingly missed out on the Uefa Under-21 Championship play-offs after losing to Italy in Pescara.
Mattia Mustacchio's early goal saw the Azzurri sneak top spot in Group Three despite a worse goal difference.
The placings were determined by results and away goals between the two sides, Wales having won the reverse fixture last year 2-1.
Manager Brian Flynn's side then missed out on one of four best runner-up places on goal difference to Iceland.
Wales went into the match three points ahead of their opponents and knowing that a draw would be good enough to win the group.
Flynn, who is among the favourites to replace Wales senior manager John Toshack, had been boosted by the arrival of Neal Eardley, Andy King and Simon Church from Toshack's squad, and all three started.
It was the visitors who began the brighter, with Joe Allen and Hal Robson-Kanu both forcing Italy keeper Vito Mannone, who is on Arsenal's books, into saves.
We played very well in two very important matches
Italy coach Pierluigi Casiraghi
But Wales were made to regret those missed opportunities when Mustacchio gave Italy the lead in the 14th minute.
Reading winger Robson-Kanu, who scored the only goal in Wales' win over Hungary on Saturday, looked dangerous and he tested Mannone again before seeing another effort blocked.
The visitors were then grateful to goalkeeper Chris Maxwell for twice denying Diego Fabbrini in quick succession.
The second half was a scrappy affair initially and three players were booked following a melee that erupted after a foul by Lorenzo Ariaudo on Church.
Wales were running out of time, but it was Italy who were threatening to score, with Maxwell saving efforts from Fabbrini and Guido Marilungo.
The last action of the match was another Italian effort, this time from Ezequiel Schelotto, as Wales, who lost 5-4 to England in the play-offs two years ago, slumped to defeat.
"We played very well in two very important matches, winning both 1-0," said Italy coach Pierluigi Casiraghi.
"I'm really, really happy, even though I know we haven't reached our target yet. If you look back at where we were two months ago, I have to be proud of my players and myself too.
"Andrea Ranocchia and Angelo Ogbonna are great defenders. Thanks to them and their team-mates we didn't get into any trouble against Bosnia and Herzegovina or Wales."
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