The vote for the new chief of the EU's only elected assembly will be closely watched in European capitals, including London, as it the parliament that will have a final say on any eventual Brexit deal.
The 63-year-old centre-right politician comfortably won the first round of voting with 274 ballots but failed to secure a majority in the 751-seat parliament based in Strasbourg, France.
The silver-haired Tajani is a former European commissioner who has faced criticism over the Volkswagen “Dieselgate” emissions scandal and previously served as spokesman for scandal-plagued Berlusconi.
If confirmed, he will replace Germany's Martin Schulz, a socialist who during five years in office made the office of European Parliament president far more prominent than it had ever been before.
Early on Tuesday the head of the parliament's Liberal group, former Belgian prime minister Guy Verhofstadt, pulled out of the race and threw his support behind Tajani, the candidate of the centre-right European People's Party (EPP) grouping.
“It is absolutely necessary. With Trump, with Putin, with many other challenges Europe faces, it is key we cooperate to reform our union,” said Verhofstadt.
The deal secures Verhofstadt's important role as parliament's chief negotiator in talks over Britain's departure from the European Union.
EPP party chief Manfred Weber said: “Our partnership is based on content and on reforms for Europe.”
'Grand coalition' breaks down
The coalition agreement struck between the two groups calls for a European defence force at a time when US President Donald Trump has cast doubt on the future of the US-led NATO alliance.
It also calls for the European Parliament to have “full involvement” in the negotiations over Britain's exit from the EU after its shock referendum vote in June last year.
The new alliance comes after a decades-old “grand coalition” between the centre-right and the socialists – under which they rotated the post of parliament chief between them – broke down.
Socialist candidate Gianni Pittella, another Italian, got 183 votes. Pittella said he will not accept an EPP “monopoly” of the EU's top jobs – held by EPP members Jean-Claude Juncker, the European Commission president, and Donald Tusk, the head of the European Council.
A Tajani win could therefore prompt calls for a reshuffle of the top jobs, adding unwelcome instability to an already crisis-hit union.
“There will no longer be a grand coalition, a privileged agreement between the big groups, because we need clarity,” Pittella said in a speech early Tuesday.
The grand coalition has been seen as limiting the influence of Eurosceptic groups led by Britain's UKIP and France's National Front, after they made stunning gains in the last European Parliament elections in May 2014.
The anti-EU movement has since gained strength, with Britons voting to leave the bloc in a shock referendum result last June, while across the Atlantic a similar wave of populism took Donald Trump to the US presidency.
By Celine Le Prioux