The Hammers youngster was surprisingly left out of the starting line-up by manager David Platt, who chose to play Aston Villa's Peter Crouch as a lone striker in the hope of catching out the Italians on the counter-attack, a ploy that seemed unlikely to succeed without the pace of Defoe and Arsenal's Jermain Pennant, who had both combined so well in the opening victory over Switzerland
Instead, it was another prolific striker, Italy's Massimo Maccarone, who stole the headlines with a stunning late goal to leave England needing a victory in their final group game against Portugal on Wednesday night to make sure of a place in the semi-finals.
If they do triumph over the Portuguese, and Italy fail to beat Switzerland, Platt's side will top the group, and probably manage to avoid facing tournament favourites France in the last four.
However, the Italians will now be highly fancied after this impressive and overall deserved victory, while Maccarone, who gave Derby County youngster Chris Riggott a torrid time all evening, will send shivers down the spines of defenders throughout the rest of this tournament.
Defoe replaced Crouch at half-time after a quiet first period for England, who were defending for most of the opening half hour as a mainly Italian crowd got noisily behind their team in the opening stages at FC Basle's St Jakob stadium.
After weathering the Italian storm early on, during which time the dangerous combination of Pirlo and Maccarone threatened to cause them serious problems, England gradually stamped some authority on the game and, indeed, came closest to taking the lead in the latter stages of the half.
First Charlton Athletic left-back Paul Konchesky was denied when his stinging free-kick from the edge of the penalty area crashed off the post, and then Fulham's Zat Knight came even closer when he rose to head home Konchesky's cross at the far post, only for referee Gonzalez to rule his effort out for a push.
However, 12 minutes into the second half, Italy finally got the breakthrough they had been suggesting, and it was Maccarone who made the difference. The Empoli striker received a short pass in the area and turned inside Riggott before slotting the ball past goalkeeper Paul Robinson with the outside of his right boot.
England's response was both immediate and stunning. Just five minutes later, skipper David Dunn wriggled his way magnificently past three Italian challenges on the right hand side of the area before looping over a cross that was missed by Defoe, but not Gareth Barry, who volleyed emphatically past Pelizzoli to bring the scores level.
That was how it looked like ending, especially when Robinson pulled off a fantastic save to deny substitute striker Iaquinta with 20 minutes remaining, while Defoe was kept quiet in the closing stages by the typically solid and ruthless Italian defending.
With just four minutes left, though, Maccarone struck again, in simply exquisite style. A lofted pass dropped just outside the area and was superbly flicked over Riggott first time by the shaven-headed hit-man, who then ran on and crashed a thunderous left foot shot past the despairing dive of Robinson.
The 22-year-old Maccarone, who came on for the full national side in their friendly against England at Elland Road recently and won a penalty that set up a victory when he was clipped by Hammers keeper David James in the final minute, has already publicly expressed an interest in playing Premiership football. There will certainly be a few top class English defenders who won't relish that prospect.