The Italians established a slim 13-10 lead by halftime but had to work hard in defence in the face of Canada's enterprising back line, which posed a constant threat until the final whistle.
Canada struck with fine tries from winger DTH Van Der Merwe and fullback Matt Evans, cancelled out by scores from Italy prop Michele Rizzo and centre Gonzalo Garcia.
But in the end it was the boot of Tommaso Allan that proved the difference between the well-matched sides, the flyhalf weighing in with 13 points.
The so-called minnow nations had done themselves nothing but credit during the tournament’s opening week and Canada continued in the same vain with their fearless approach at a sun-drenched Elland Road.
After flyhalf Nathan Hirayama kicked his side into a 3-0 lead, Van Der Merwe burst down the flank and exchanged passes with Ciaran Hearn before surging clear for the opening try.
Their 10-0 lead lasted barely a minute, however, as powerful prop Rizzo powered over and Allan knocked over the conversion.
Another Allan penalty levelled the scores at 10-10, but the Maple Leafs continued to look dangerous and break tackles as choruses of "let’s go, Canada" reverberated around the stadium.
Allan’s third penalty gave Italy a slender 13-10 advantage at the break, but Canada flew out of the traps in the second period with Evans racing through and beating the covering defence to score in the corner.
Winger Phil MacKenzie then had a try disallowed for a forward pass as the 33,000-strong crowd roared on the underdogs as they cut through the Italian defence at will.
For all their enterprise, however, Canada were left to rue their inability to turn the breaks into points and Italy's Garcia crashed over for a converted try in the 57th minute to open up a five-point advantage.
A Hirayama penalty pulled back three points, but a high tackle by Van Der Merwe opened the door for Allan to kick another penalty to seal victory for a relieved Italy.
(Editing by David Goodman)
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