Chelsea star Jorginho rolled home the winning penalty with a skip and a jump after Alvaro Morata missed to end an extraordinary, end-to-end encounter.
England will try to join the Italians in the Wembley showdown on Sunday when they face Denmark in the other semi-final tomorrow.
Describing the action for talkSPORT, former England international Stuart Pearce said: “This has been the game of the tournament.
Pearce said: “The clinical nature of that counter attack was incredible. They swept down the pitch and when it arrived at Chiesa’s feet, he opened his body up and curled it with pace to the far corner.”
But Spain carried on zipping around the Italians with vigour and eventually got the reward their performance deserved.
Morata, who would eventually become the villain again, came off the bench to briefly make himself a hero, demonstrating excellent control and coolness after bouncing off Dani Olmo to equalise with ten minutes left.
“Wonderful football,” Pearce said. “This was all about Morata, he showed real composure.”
The closing stages, and indeed extra-time followed a similar pattern of Spanish pressure with Italy looking dangerous on the break, although the irrepressible tempo understandably dropped.
Such a spectacle deserved penalties, but the opening spot-kicks did not match what had gone before.
Manuel Locatelli saw his effort saved by Unai Simon and then Olmo blazed over the bar.
But successful penalties followed, except for Morata, who was denied by Gianluigi Donnarumma, giving Jorginho the chance to win it 4-2 for Italy.