Copied from a post made to the Italian Dual Citizenship message board:
Here's a reasonably complete list of the geographic places where Italian citizens have the right to live and/or pursue their (legal) livelihoods. If you have any corrections or additions, please send me a private message and, if possible, include a citation.
Croatia (as of July, 2013)
Denmark (excluding Greenland and the Faroe Islands)
Finland (with limitations in Åland)
France (including most of its overseas territories)
Greece (effectively excluding Mount Athos)
Netherlands (including its overseas territories)
Portugal (including its overseas territories)
Spain (including its overseas territories)
United Kingdom (excluding many of its overseas territories)
The Vatican (subject to the Holy See's decisions)
I just stumbled across another interesting dimension to Italian citizenship. In the 1960s, Italy and Panama signed a "Treaty of Friendship, Commerce, and Navigation." (I'm trying to find a direct link to the treaty, but I haven't found it yet.) That treaty grants Italian citizens permission to live and work in Panama indefinitely and without too much hassle. As far as I can tell Italians are unique among foreigners in being granted this special permission in Panama.
According to this law firm, you need to supply the following:
copy of your passport, notarized by a Panamanian official
criminal record (original country or country where resident)
medical certificate of good health (dated within 3 months)
payment (about US$250)
sworn declaration of personal background
document showing the purpose of permanent residence (e.g. business interest)
proof of economic solvency
Once approved, an Italian citizen can live and work in Panama as long as desired.
There was about a 14 month period (February, 2008, to April, 2009) when this treaty right was suspended, but according to what I can find this treaty right has been restored and is currently available.
Counting Panama, Italian citizens can live and work indefinitely in 32 countries. And I'm not done searching yet, so perhaps I will find more.
I'm not sure why Panama granted this permission to Italians particularly, but there it is.