Paddy Power Italian customers will be migrated to Betfair.it.
Sources believe the decision was made shortly after Paddy Power and Betfair finalized their merger deal last year.
The announcement comes amid reports of a possible tax rise for both land-based and online betting operators in the country.
The current tax rate for land-based companies could reportedly rise from 18% to 19%. Online operators could face a similar tax boost, with the rate set to increase from 22% to 23%.