After falling behind to a late first-half strike from Dante, Italy levelled the match through Emanele Giaccherini just after the break.

However, two goals from Fred and a sensational free-kick from Neymar sent them to defeat despite a Giorgio Chiellini consolation strike giving them hope at 3-2.

Starting Saturday's game without Andrea Pirlo or Daniele De Rossi meant Italy had a new some new faces in the centre of midfield, and their ranks were depleted further as they lost Ignazio Abate and Riccardo Montolivo through injury in the opening half-hour.

Italy were equal to Brazil in the opening 45 minutes but after their equaliser the hosts raised the tempo, catching Prandelli's side off guard.

However, despite their defeat in Salvador, the coach praised his team's fighting spirit.

"We had a great performance in the second half and deserved an equaliser, but against great players it takes nothing for them to punish you,” he told Rai Sport. "I am very satisfied, as we played the second half with great character. The reaction was excellent, we attacked the space and on 3-2 we could’ve drawn level.

"We were forced into two early changes, so it was tough, but after the break we saw our system and it worked."

The defeat means Italy finish second in Group A behind Brazil, and will face the winners of Group B in the semi-final.

That means an encounter with world and European champions Spain in Fortaleza on Thursday, and Prandelli knows it will be a tough encounter for his side given the last time they met, Spain won 4-0 in the 2012 European Championships final.

"We are looking for growth and these games help us grow a great deal," he added. "Spain are the best team in the world, so if we face Spain then we will recover our fitness levels and play Spain.”