Jersey's hopes of playing in the ICC Twenty20 European Division 1 final were dashed as they lost in the semis to Italy by 14 runs at Farmers Field.
Italy won the toss, batted first and, with 55 from South African Damien Crowley, reached 133-8.
Despite a positive opening three overs Jersey had begun to fall behind the required run rate by midway.
Peter Gough top scored for the island with 31 but, with 19 required off the last over, Jersey fell well short.
The victory was descibed by Italian captain Alessandro Bonora as "Italy's finest cricketing hour".
Italy now play Denmark, who comfortably beat Guernsey by 58 runs in the other semi, in the final.
Jersey now face their fellow Channel Islanders in the third/fourth place play-off.