The Three Lions lost 1-0 to hosts Israel and crashed out of the tournament bottom of group A, as Italy scored a last-minute equalizer to ensure they booked their semi-final placeIsrael Under-21s 1-0 England Under-21s
Ofir Kriaf's long-range strike secured victory for the tournament hosts as Stuart Pearce's men finished rock bottom in Group A with three straight defeats.
Pearce made seven changes following his side's 3-1 defeat to Norway on Saturday as Jason Steele started ahead of Jack Butland in goal, while Nathaniel Clyne, Andre Wisdom and Tom Lees came into defence.
Josh McEachran was handed his first start of the tournament in midfield, while Jonjo Shelvey and Connor Wickham were preferred to Jordan Henderson and Nathan Redmond.
Wingers Wilfried Zaha and Thomas Ince were England's likeliest source of a breakthrough but they struggled to create chances against disciplined opposition.
And late on Ofir Krieff made the Young Lions pay, curling the ball between two defenders and beyond goalkeeper Luke Steele to give the hosts a narrow victory.
Italy Under-21s 1-1 Norway Under-21s
Italy scored a stoppage time equaliser to earn a deserved draw against Norway and finish top of group A.
Norway's Stefan Strandberg looked to have scored the winner for the Scandinavians after he converted a penalty in the 90th minute.
However, in the final minute of added time, Italy's Andrea Bertolacci latched onto the end of a long ball in the Norwegian box and fantasically hooked the ball home.