Rita Fossaceca, 51, died on Saturday in the village of Mijomboni, which is situated less than 30 kilometres (20 miles) inland from the resorts of Malindi and Watamu.
The radiologist from Novara in northern Italy was in Kenya volunteering for the For Life charity organisation, which is in the process of establishing an orphanage and a clinic in Mijomboni and also works to promote alternatives to coming-of-age ceremonies involving female genital mutilation.
"My sincere condolences and thoughts go to the family of Signora Fossaceca, a woman who was loved and respected for her profound dedication and commitment to helping the weak, the sick and the women of Africa," Foreign Minister Paolo Gentiloni said.
Fellow volunteer Marcello Stoppa wrote on the NGO's website that: "Sometimes things happen that are inexplicable. She paid with her life for her love of children."
The injured Italians were reported to have been Fossaceca's parents and another relative. Italian media reported the doctor had been shot dead after trying to defend her mother from a machete attack.
Fossaceca had been in Kenya for only three weeks on her latest trip. In her final post on the NGO's site, she described buying a cow for the orphanage.
"She is pregnant and in three months we will have a calf and finally we will have milk for the village," she wrote.
The murder is another blow to Kenya's tourist industry which has been hit hard in recent years by the fallout from deadly attacks mounted by Islamists based in neighbouring Somalia.
Kenyan officials had been hoping for a boost to visitor numbers in the aftermath of last week's visit by Pope Francis, which passed without incident.