Italy held off a superior Spain side for most of the match in Enschede, but struggled to create many chances and lost to a late goal by substitute Joselu.
Although Inter Milan lost to Manchester City in the Champions League on Saturday, AS Roma were edged by Sevilla on penalties in the Europa League final and Fiorentina were beaten by a last-gasp goal from West Ham United in the Europa Conference League, it was a shot in the arm for Italy.
Lecce goalkeeper Wladimiro Falcone, Torino defender Alessandro Buongiorno and Atletico Tigre striker Mateo Retegui were all named in the national squad for the first time, bringing Mancini's total number of players called up for Italy to 102.
Balotelli was one of several surprise call ups including Brazil-born Joao Pedro, now an Italian citizen, who was recently cleared to play for Italy.
Mancini has recalled all but the injured Leonardo Spinazzola from Italy's triumphant Euro 2020 squad for their World Cup qualifiers.
The Azzurri will face England in the final at Wembley on Sunday, bidding to win their second European Championship title and first since Zoff helped the team to victory in 1968.
Insigne credited coach Roberto Mancini for building a "fun" atmosphere around the national team squad that has allowed him to put in his best performances.
Italy kicked off the European Championship in emphatic style on Friday as they delivered a commanding performance to sweep past toothless Turkey 3-0.
Italy face Turkey in Rome as Euro 2020 finally gets underway a year behind schedule and with the coronavirus continuing to cast a shadow over the tournament.
Mancini has tested positive for COVID-19, the country’s football federation (FIGC) said on Friday.
Juventus managed to win the Serie a title for the last nine seasons but this season it seems that they are not in their best form.
Mancini was among the crowd at the Stadio Olimpico as all three played in Roma's 2-1 Champions League win over Porto.
Italian media agreed the performance was one of the best in the last few years.
Italy's new coach Roberto Mancini is putting his trust in Mario Balotelli, saying the maverick forward has matured during his two seasons with Ligue 1 side Nice.
Roberto Mancini outlined his plans to take Italy back to the top and recall maverick forward Mario Balotelli to the line-up.
Ex-Manchester City and Inter Milan coach Mancini told Italian officials he was prepared to leave Zenit.
The partnership between Sampdoria Italian strikers Roberto Mancini and Gianlucca Vialli led Sampdoria to win the title for the first time in their history.