There were just 177,000 babies born last year - the report by the Association for the Industrial Development of Southern Italy (Svimez) said.
For the second year running there were more deaths than births in southern Italy, a phenomenon which has only previously been recorded in 1867 and 1918.
The falling birth rate risks creating “a demographic distortion, a tsunami of unpredictable consequences”, the report said.
Coupled with emigration, which saw 116,000 people move elsewhere last year, southern Italy could lose 4.2 million people over the next few years.
The southern regions face “human and industrial desertification”, as a lack of jobs and investment has led to a sharp rise in poverty, Svimez said.
Greater prosperity in the central and northern regions is reflected in the birth rate, with 388,000 babies being born last year. The figure is far from the historic low of 1987, when there were 288,000 births.
But the birth rate across Italy continues to decline, with women in 1970 having an average of 2.38 babies compared to just 1.43 by 2012. While the fertility rate is falling across Europe, Italy’s figures fall below the 1.58 EU average.
The government this month tried to encourage couples to have more children, offering a €80 monthly payment to new parents with an annual income below €90,000.
The short-term measure will, however, have little immediate impact on Italy’s ageing population. With 20.8 percent of the population over 65, Italy has the highest percentage of pensioners in Europe.