The accident happened during the course of over-zealous do-it-yourself work, which was being carried out on an adjacent building, Naples-based newspaper, Il Mattino reported.
The fresco, which depicts the Madonna with Saint Peter and a donor, is located inside the Basilica of San Giovanni Maggiore, in the centre of the city.
It is thought to have been painted by local nobleman and artist, Tomasso Assan Paleologo, between 1522 and 1533.
Fortunately, the neighbour's drill narrowly missed St. Peter's face, but caused a piece of the fresco from just above his shoulder to come away from the wall.
"There are no words for what has happened," said Luigi Vinci, the president of Naples' engineers' association.
"We're talking about an immensely valuable work of art which attracts foreign tourists."
To make things worse, the accident disrupted a graduation ceremony for students from the University of Naples' School of Oriental Studies, which had hired out the church for the occasion.