The pun on the front page of Tuttosport, which referenced the striker's skin colour, has come under scrutiny but the publication's assistant editor has denied any wrongdoing
Balotelli scored two goals to fire Italy to victory against Germany in their Euro 2012 semi-final on Friday and the publication used the headline "Li abbiamo fatti neri" on the front page.
The phrase translates to "We have made them black" and means to bruise or to make someone black and blue.
The headline follows another controversy in Italy after La Gazzetta dello Sport printed a cartoon depicting Balotelli as King Kong, for which they later apologised.
Tuttosport's assistant editor, Gianni De Pace, defended the headline but did acknowledge that it referred to Balotelli's skin colour.
"It was a reference to him being black, but it is just a pun," De Pace said, according to the Guardian. "It was also because when he took his shirt off he looked like a boxer who bruises opponents.
"There are three sporting newspapers in Italy and we have to make an impression with language which has an impact, but no one in Italy will have seen this as racist.
"When Juventus fans abused Balotelli we [Tuttosport] were very tough on them. We are proud to have Balotelli as an ambassador of multi-ethnicity in Italy."
Anti-racism campaigner Robert Elliott, who works for Italian monitor organisation Occhio Ai Media, disagreed and labelled the headline "highly offensive".
"It is highly offensive, you cannot brush this off as a pun," Elliott insisted. "Drawing attention to the colour of Balotelli's skin dehumanises him and labels him as a black player before all else, even when he is proudly playing for Italy."