Italy's jobless rate fell by 1.1 percent to 11.8 percent.
The youth unemployment rate also fell by 0.2 percent to 40.5 percent after hitting 44.2 percent in June - the highest level since 1977.
Premier Matteo Renzi has credited the gradual decline to his so-called Jobs Act, which came into effect in March and has given employers greater flexibility when it comes to hiring and firing.
Since the beginning of the year, the number of people in permanent roles has risen by 77,000, Istat said.
The figures also followed data that showed business confidence in Italy at its highest level since 2007 and consumer confidence at a 13-year-high.
Istat said on Wednesday that its consumer confidence index rose to 116.9 points in October, up from 113 points in September, while the business confidence index reached 107.5 points, from 106.1 points in September.
Italy emerged from a three-year recession at the start of this year, with growth in 2015 forecast at 0.9 percent, and 1.6 percent in 2016.