A package of about €1.5 billion of European and national funds is being released to finance action to get 200,000 young Italians into work, Prime Minister Enrico Letta said at a press conference.
The national unemployment rate in April rose to a record 12 percent and youth unemployment reached 40 percent as the country struggles to shake off the grip of a two-year recession.
Most of the money will be spent in the poverty-stricken south of the country, but will ease the employment of people on temporary contracts throughout Italy, and boost training, internship and school-leaver schemes.
The measures, which include fiscal incentives for companies which take on people under 30, were unveiled on the eve of a European Union summit in Brussels on youth joblessness.
Letta said with the new measures in hand he could present the summit with "solid arguments, to fight a great battle, a European battle."
The premier also revealed a three-month delay in the scheduled rise in the main rate of VAT sales tax from 21 percent to 22 percent.
The rise had been tabled for , but had become the focus point for growing tensions in Letta's uneasy coalition government, with calls from the right for it to be scrapped.
While Letta has been unwilling to do away with the planned rise altogether because of the toll it would take on the country's finances, he had come under increasing pressure to buy more time to tackle the issue.
"We wanted to give a sign of our attention to consumption, commerce, the economy and consumers, in the hope that this helps re-launch the economy," Letta said.
Finance Minister Fabrizio Saccomanni told the press conference that the new measures would be implemented "without creating new debt".
Italy, with the eurozone's third-biggest economy did worse than thought in the first quarter of this year, shrinking by 0.6 percent, and Italy has suffered from two poor debt bond auctions this week which have raised investor anxiety once more over the debt market.