The mercurial Balotelli headed in the decisive second goal in the 50th minute after Claudio Marchisio struck in the first half (35th minute) for the Azzurri in a gripping Group D contest here. Daniel Sturridge had kept England in the match with a 37th minute goal on a busy day at the event which featured four matches.
In other matches, two-time former champions Uruguay were shocked by Costa Rica, a team which had failed to qualify for the 2010 edition.
Uruguay led through a penalty scored by Edinson Cavani in the 24th minute but Costa Rica turned it around magnificently in the second half to score an upset win.
Later, Ivory Coast got the better of Japan despite trailing 0-1 in the first half in the fourth and final match of the day. Ivory Coast headed in two goals, the quickest consecutive strikes in a World Cup match, within two minutes of inspirational veteran Didier Drogba taking the field as a replacement.
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But the big match of the day was undoubtedly between former champions Italy and England. Played in the heart of the Amazon jungles here, the two teams beat the heat and humidity to dish out an engaging encounter.
The Italians lost skipper and goalkeeper Gianluigi Buffon hours before the start of the clash due to injury but did not allow the setback to affect their performance. Buffon's replacement, Salvatore Sirigu, was excellent under the bar and made some fine saves.
In a fascinating first half, Italy surged ahead on a set-piece goal in the 35th minute by Marchisio and England retaliated two minutes later through Daniel Sturridge, brilliantly fed by Wayne Rooney and Raheem Sterling.