A late goal from Italy striker Stefania Tarenzi condemned Scotland to a second defeat in the Cyprus Cup.
Christiana Girelli gave the Italians a two-goal lead with strikes either side of half-time.
However, Scotland reduced the deficit when Emma Mitchell headed in at the back post.
Kim Little drew Scotland level with 10 minutes to go when she rounded the goalkeeper, only for Tarenzi to find a last-gasp winner.
Scotland had already lost 2-0 to Canada on earlier this week and now face South Korea on Monday to determine which play-off game they go into on Wednesday.