Distraught fans of the one-time top dogs of the global game reacted with shock and disbelief.
The Italian press called it an "apocalypse" for the team, who last failed to qualify for the 1958 World Cup and have played every other edition apart from the inaugural tournament in 1930.
Tearful captain Gianluigi Buffon quit international football and coach Gian Piero Ventura said he would consider his future after the Azzurri drew 0-0 with Sweden on Monday to lose 1-0 on aggregate.
The Italian football federation called crisis talks for Wednesday with 69-year-old Ventura expected to be sacked.
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"We are deeply affected and disappointed," said federation president Carlo Tavecchio. "It's a sporting failure that requires shared solutions by everyone."
For many the defeat reflected a profound malaise in Italian football with the 2006 World Cup triumph having been followed by group stage exits from the last two World Cups.
"It's the biggest Italian sports catastrophe of the last 60 years, which cannot be blamed on the coach," former Rome mayor Walter Veltroni told Rai Radio 1, suggesting a total clearout of the hierarchy.
"A new president, a new coach, are needed. After (Alessandro) Del Piero and (Francesco) Totti there is a fundamental problem in Italian football lacking authority."
For Buffon it was a national catastrophe more than a personal disappointment.
"I'm not sorry for myself but all of Italian football, because we failed at something which also means something on a social level," he said.
The 39-year-old goalkeeper, who has 175 international caps and was an integral part of the 2006 World Cup victory in Germany, had been hoping to compete in a record sixth World Cup.
- 'Resign? I don't know' -
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The former Torino coach said he would first talk to the federation president before making a decision on his future.
"Resign? I don't know. I have to evaluate an infinity of things. I have not yet spoken to the president," said Ventura. "It doesn't depend on me, I'm not in the state of mind to face this question."
"It's a very heavy result to bear, because I was absolutely convinced that we had this ferocious desire to overcome the obstacle."
"It is really very sad because watching the World Cup was something that really brought us together as Italians," said graduate Stefania Pusateri, heading for the exit after watching the match in a Rome bar.
"But what is sure is that the shock will be even worse for my father. He is 54 years old and he has never had to go through something like this."
Drinking coffee the morning after, young Roman Carlo said Ventura did not deserve to take all the blame.
The game in Milan witnessed a generational shift for Italy, with Buffon and fellow 2006 veterans Andrea Barzagli and Daniele De Rossi all quitting the team, while Giorgio Chiellini also hung up his Azzurri jersey.
"The era of four or five veterans comes to a close, the one of the hungry young players coming through begins and that's how it should be," said Ventura, who took over from Chelsea coach Antonio Conte in 2016 with a contract until June 2020.