The Americans' silver was the country's first medal of the games. South Korea took bronze.
Michele Frangilli, Marco Galiazzo and Mauro Nespoli hugged and raised their hands in celebration after the final arrow from Frangilli beat the Americans 219-218 at Lord's Cricket Ground. The gold was Italy's first ever in the event.
Frangilli, who won the team bronze in 1996 and the silver in Sydney, called the final a "very hard fought" match.
"I have been chasing this medal for 16 years," he said through a translator. "This is a dream come true. It's a very strong emotion and with really, finally, with the last arrow that hit I think it was my dream, I think it was my biggest contribution."
Frangilli said he heard the crowd noise after Galiazzo scored an eight on his last shot. When he stepped up for his final shot there was "incredible pressure" and he tried to "empty his head a little bit," knowing he needed a 10 for the victory.
"I really tried to find the right technique, and I knew I hit the golden area," he said. "When I heard 10 I was obviously very, very happy."
In their win over South Korea in the semifinal Americans Brady Ellison, Jacob Wukie and Jake Kaminski started slowly but were able to come back to win 224-219.
Not the case against the Italians. The American pulled within 165-163 at the end of the third round.
"For some reason it's just kind of something we've been doing lately," Ellison said of recent slow starts, adding that three of the Americans arrows missed a 10-score by a quarter inch (about half a centimetre).
He praised Frangilli and his teammates.
"They shot awesome," he said, adding that his team believed it had figured out the wind by the time the final came up.
Italy beat Mexico 217-215 to make the final.
The top-ranked South Koreans beat Mexico 224-219 for their bronze after falling to the Americans by five points in the semifinals.