Egyptian Hamdy Mahisen released the video as part of a social experiment. Thirty-year-old Mahisen, who speaks fluent Italian, can be seen wearing a traditional white robe and cap, and carrying a copy of the Koran.
As he makes his way through the streets of Milan, one onlooker is heard saying “Imagine if he has a gun under his tunic", while another shouts “Taliban shit”. Other bystanders glance suspiciously at Mahisen as he walks past.
The video comes in the wake of Islamic State’s video showing the beheading of 21 Egyptian Coptic Christians in Libya, fuelling Islamophobia and anti-immigration sentiment in the country.
Italy called on Wednesday for urgent international action to halt Libya's slide into chaos and said it was ready to help monitor a ceasefire and train local armed forces.
Italian Foreign Minister Paolo Gentiloni told parliament that possible alliances between local militias and IS militants, inspired by their counterparts in Syria and Iraq, risked destabilising neighbouring countries.
"The deterioration of the situation on the ground forces the international community to move more quickly before it's too late," he said in a special address on the crisis.
"There's a clear risk of alliances between Daesh and local groups," he said, using a common Arabic name for Islamic State.
"The situation must be monitored with the maximum attention."
Italy, whose southern islands are only around 300 kilometres (186 miles) from the Libyan coast, has watched in alarm as the country has unravelled since Western forces helped topple Gaddafi.
Hundreds of thousands of migrants have arrived in southern Italy in unsafe boats, their departure from Libya facilitated by people smugglers operating freely in conditions of near-anarchy. Last week, more than 300 were reported to have died attempting the crossing.
Gentiloni said the surge in migrant arrivals, up nearly 60 per cent in the first six weeks of the year to more than 5,300, was clearly connected with the security situation in Libya.
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