The Manchester City striker's participation in the tournament appeared to be in real jeopardy after he was omitted from the squad to face the United States in February because of his "agitated" behaviour, and his subsequent dismissal in his club's crucial Premier League clash with Arsenal only appeared to diminish his hopes further.
However, after apologising for his actions, the former Inter striker is now set to be welcomed back into the Italian fold in time for the Euros.
“Have I made peace with Balotelli? Yes, although to be honest we never argued in the first place,” Prandelli told RAI.
“I was pleased that he took responsibility with his statements after the latest incident at Manchester City. I like those who stand up and accept responsibility for their actions.
“I never really thought of doing this without Balotelli, as he is a focal point of the national team.”
However, Prandelli ruled out the possibility of calling up either Francesco Totti or Alessandro Del Piero for the competition - unless his hand is forced by an injury crisis.
“If I should find myself in an emergency situation with the team, I would call on the old champions," he admitted. "However, I have a project for Italy and it involves young players.
“We will evaluate some new faces ahead of the Euros. I called up [Fabio] Borini last time [against USA], so the youngsters can certainly dream of a place in the tournament.”
Prandelli reiterated, though, that there will be a place in his squad for Antonio Cassano if he can prove his fitness after recently returning to action after five months out following an emergency heart procedure.
“We can bring him back and his enthusiasm is contagious," the former Fiorentina boss enthused. "He wants to play for the national team and I need players like him."
Italy have been drawn in the same group as defending champions Spain, Republic of Ireland and Croatia.