Robert Vittek scored a brace to put the Slovaks in control and Kamil Kopunek added a late third either side of Antonio Di Natale and Fabio Quagliarella strikes in a frantic finish.
Slovakia join Paraguay in the last 16 from Group F after a thoroughly deserved victory in a game which summed up Italy's lacklustre campaign.
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The defeat also meant Italy suffered the extra humiliation of finishing bottom of the group, which was won by Paraguay, with even little New Zealand ahead of them in third spot.
Italy started brightly with a couple of half chances as Di Natale, making his first start in the competition, tried a speculative long range volley, which sailed over, while Vincenzo Iaquinta screwed a shot wastefully wide with his left foot.
However, the Italians went behind for the third game in a row as Juraj Kucka cut out a poor Daniele De Rossi pass deep in Italian territory and fed Vittek who rifled home low and hard from the edge of the box.
Zdenek Srba then forced Italy goalkeeper Federico Marchetti into a sprawling save with a surprise shot from distance.
However, Liverpool centre-back Martin Skrtel almost headed into his own goal from De Rossi's deep ball into the box.
The half finished with Kucka lashing a stunning volley an inch wide of the post as Italy failed to get any foothold in the game.
The Azzurri finally opened up the Slovak defence on 55 minutes as substitute Christian Maggio slipped in Di Natale but on the turn he shanked his shot wide.
A minute later Lippi rolled his last throw of the dice as he brought Andrea Pirlo on for Riccardo Montolivo for the AC Milan star's first appearance in South Africa.
Di Natale tried a curler from the edge of the box that goalkeeper Jan Mucha dealt with competently while Maggio had to get back to stop Miroslav Stoch getting a clear run on goal.
Italy were then a whisker away from equalising as Skrtel blocked Quagliarella's shot on the line with his knee.
Stoch then had a chance to finish things on the counter but he blazed wide as if anything, Slovakia were looking the more likely to score.
And so it proved on 73 minutes as Vittek grabbed his second as he stole into the near post to convert Hamsik's cross.
But that sparked a crazy finish to the game. Nine minutes from time Italy scored with a brilliantly worked goal as Quagliarella played a one-two with Iaquinta and although Mucha saved his shot, Di Natale swept home the loose ball.
That prompted an ugly melee in the net with Quagliarella and Mucha booked.
Quagliarella then had a goal rightly ruled out for offside before substitute Kopunek bagged the third with his first touch.
In a tense conclusion, Quagliarella scored with a delightful chip but it was too late to save the ageing champions.
