Italy won their first international trophy since 1938, but needed a replay to see off Yugoslavia in the final.
Angelo Domenghini equalised with an 80th-minute free-kick for Italy after Dragan Dzajic opened the scoring in the first half.
But goals from Luigi Riva and Pietro Anastasi won the replay 2-0, as Yugoslavia again fell at the last hurdle.
Italy had advanced to the final thanks to pure luck.
The hosts' game with USSR ended goalless after extra-time, and with a tight tournament schedule to meet, the match was decided by a coin-toss.
Soon after Uefa adopted the penalty shoot-out as a means of decided drawn competition games.
The Yugoslav's bruising semi-final against world champions England was decided by Dzajic's cool lob over Gordon Banks with only three minutes remaining.
Alf Ramsey's side had progressed to the last eight after the results of two Home Championships were combined, and two wins over holders Spain ensured progress to the final four.
The other qualifiers had to finish top of a preliminary group stage before their knockout quarter-finals, thanks to the higher number of entrants - 31 in all.
West Germany failed to make the cut from Group 4, and their exit was the surprise of the qualifying stage.
In the last game of the group they required a win in Albania to advance at the expense of Yugoslavia, but the World Cup finalists were held to a 0-0 draw for arguably Albania's greatest-ever result.
Italy had no such problems advancing from Group 6, but needed to recover a first-leg deficit to beat Bulgaria in the last 16.
The Soviet Union did the same against Hungary, while Yugoslavia dumped out France, courtesy of an emphatic 5-1 home win after a draw on French soil.