Barcelona midfielder Thiago, who was born in Italy where his Brazilian father Mazinho was playing for Lecce, doubled his total haul for the side with all his goals coming in the first-half. Isco added a fourth in the second-half while Italy's goals came from Ciro Immobile and Liverpool's Fabio Borini.
Isco, a target for Manchester City and Real Madrid, played a neat exchange of passes with Real Madrid youngster Alvaro Morata. Morata, scorer of three goals in the tournament, got to the byline on the left side of the box and put in the perfect cross as Thiago rose unmarked to head home.
However, the Italians drew level three minutes later as a Matteo Bianchetti long ball from inside his own half found Immobile, who controlled the ball beautifully before lifting it over David de Gea. Morata's extra pace exposed the Italian defence in the 16th minute, but his low shot was blocked by Italian goalkeeper Francesco Bardi.
De Gea also had to be alert when Alessandro Florenzi was found by Borini, but the Manchester United guardian did brilliantly to bat away the Italian's shot. Both sides traded possession until more woeful Italian defending allowed Thiago to score his second of the evening.
Italian captain Luca Caldirola was once again the principal offender as his missed clearance fell into the path of Thiago, who brought the ball down before unleashing his shot which went in between the Bardi's legs. The Italians' troubles built in the 38th minute as Cristian Tello was brought down by Giulio Donati. Thiago stepped up to slot home the penalty to complete his first hat-trick for the U-21 side.
Bardi kept the scoreline respectable for most of the second-half with saves from Thiago and Isco, but the rampant Spaniards grabbed a fourth in the 66th minute.
Another rash tackle in the penalty area by Vasco Regini on Martin Montoya saw a penalty awarded, and this time Thiago stepped aside to allow Isco to take it, and he put it away with aplomb.
The Italians, though, kept plugging away and Borini scored a cracking goal from outside the box with ten minutes remaining.