The rate fells from 12 percent in July to 11.9 percent – the lowest level since February 2013, the agency said.
The number of people in jobs rose for the third consecutive month, with 69,000 more people employed in August and 325,000 jobs created in a year.
Prime Minister Matteo Renzi took the opportunity to hail his controversial ‘Jobs Act', which came into place late last year, a success, saying the controversial labour reforms are “bearing fruit” and that from now on, Italy is “full speed ahead”.
Labour Minister Giuliano Poletti said the Istat data is further evidence that “recovery is a reality”, while Economy Minister Pier Carlo Padoan said “we're on the right track”.
Italy has been slowly emerging from its longest recession since the Second World War, with the government earlier this month raising its GDP growth forecast for this year to 0.9 percent.
During a speech at the Clinton Global Initiative in New York on Sunday, a jubilant Renzi said Italy could become the economic powerhouse of Europe, so long as it pushes ahead with further reforms.
Read more: 'Italy can be stronger than Germany': Renzi
On Wednesday, he praised his government for dragging the country out of the “financial quicksand” in less than two years.
However, the World Economic Forum said in a report on Wednesday that Italy's economic recovery is threatened by old woes, including burdensome red tape and huge public debt.
Still, the country crept up six places in its annual report on competitiveness, to 43rd place from 49th in 2014.
Read more: Old woes threaten Italy's economic revival