Out-half Brett Connon had an 11-point contribution in a man-of-the-match display ensuring an impressive victory for the visitors.
Unconverted efforts from Wallace and Cosgrove bookended a largely positive first half for Wayne Mitchell's youngsters, who defended stoutly particularly when down to 14 men.
The Italian scrum was dominant at times but the hosts lacked the clinical edge that Ireland showed, and the combination of Fanning's try and Connon's reliable boot saw the U-18 Clubs side home.
Ireland kicked off at the Stadio G. Maini and enjoyed a brilliant start, with Mullingar centre Wallace going over for an unconverted try within 90 seconds.
The hosts gained good territory in response and threatened through their strong pack, but pressure from the Irish lineout and scrum forced errors and kept Italy scoreless.
Italian number 10 Matteo Minozzi missed his first shot at the posts after an Irish offside, but he made no mistake in the 16th minute to claim Italy's first score.
Newcastle Falcons' Connon - one of four Exiles in the Irish side - replied four minutes later with his first penalty goal and he cancelled out a second effort from Minozzi as Ireland held an 11-6 advantage.
The gap was widened to 10 points in the 36th minute when Sligo flanker Cosgrove dotted down out wide after Ireland had swiftly turned defence into attack, clawing territory back through a long kick downfield.
A 16-6 half-time lead was an excellent return for this young Irish team, considering the 30% share of possession they had to work off.
Minozzi converted a penalty for the first points of the second half, but the increasingly influential Connon answered back with a superb strike from 50 metres for a 19-9 scoreline.
The sides cancelled each other out until Fanning slipped through the Italian defence for Ireland's third try of the afternoon, entering the final quarter.
Connon added the extras and although he ended the game with two more misses off the kicking tee, Ireland's well-organised and disciplined defence - beefed up by the impact of the bench - kept the Italians try-less throughout.
Referee: Thomas Charabas (France)
U18 IRELAND YOUTHS v U18 Italy Youths - 15th February, 2013
1. Philip Poillot (Clonakilty RFC - MUNSTER)
2. Dylan Power (Waterpark RFC - MUNSTER)
3. Jake Byrne (Northampton Saints - EXILE)
4. Hugh Sloan (Bath RFC - EXILE)
5. Sean O Leary (Midleton RFC - MUNSTER)
6. Matthew Cosgrove (Sligo RFC - CONNACHT)
7. Conor Farrell (Navan RFC - LEINSTER)
8. Neil Reilly (Ardee RFC - LEINSTER) capt
9. Andrew Feeney (Suttonians RFC - LEINSTER)
10. Brett Connon (Newcastle Falcons - EXILE)
11. Brian Fanning (Bruff RFC - MUNSTER)
12. Kieran Joyce (Silhillians RFC - EXILE)
13. Ronan Wallace (Mullingar RFC - LEINSTER)
14. Patrick Daly (Ballinrobe RFC - CONNACHT)
15. Ciaran Frawley (Skerries RFC - LEINSTER)
16. Adam McBurney (Randalstown RFC - ULSTER)
17. Vakhtang Abdaladze (Coolmine RFC - LEINSTER)
18. Ben Betts (Young Munster RFC - MUNSTER)
19. Joseph Carley (Enniscorthy RFC - LEINSTER)
20. Josh Barnes (Tralee RFC - MUNSTER)
21. Conor Hand (Navan RFC - LEINSTER)
22. Cameron Fullerton (Coleraine RFC - ULSTER)
23. Colin Kenny (Buccaneers RFC - CONNACHT)