Roberto Mancini suggested the failings of Italy are due to the problems within Serie A where "coaches don't let young players play because they are afraid of making mistakes".
Italy secured their first European Championship since 1968 with a penalty shoot-out win over England last July, but World Cup play-off heartbreak followed in March for the Azzurri against North Macedonia.
The narrow 1-0 defeat meant Italy missed out on a second successive World Cup, having failed to qualify for both Russia in 2018 and Qatar four years later.
Italy's failure was met with widespread criticism of the domestic game in which critics suggest younger players are not offered as many opportunities to develop, with a preference to rely on foreign players.
This was represented by Mancini's reliance on the likes of Giorgio Chiellini, Leonardo Bonucci, Ciro Immobile and Lorenzo Insigne, with the younger players largely remaining on the periphery at Euro 2020.
Mancini, speaking at a forum to discuss Italian football on Friday, acknowledged little has changed in Italy to develop homegrown talent in recent years as he expressed his concern.
"In the last four years, little has happened and in fact in the national team we are always the same," he said, as quoted by CalcioMercato.
"The first thing is to give more confidence to the coaches as Milan did with [Stefano] Pioli: two years ago he seemed to be leaving, today he is winning the championship.
"Many coaches they don't let young players play because they are afraid of making mistakes. Being down to 32 per cent of Italian players [in Serie A] is highly limiting for all national teams.
"[Nicolo] Zaniolo arrived in Coverciano [Italy's training base] for the first time and looked like a child, after two months everything has changed. The boys improve quickly."
Mancini was quick to praise the race for this season's Scudetto, with Milan requiring just a point on the final day at Sassuolo to secure the title ahead of Inter, who have an inferior head-to-head record.
However, he reiterated his desire to see younger players provided with more opportunities.
"First of all we must say that it was a beautiful championship, where many have fought for the Scudetto until recently," he added.
"I don't know who will win, I think Milan are at a bit of an advantage. But the matches must be played, then whoever wins will deserve it, be it Inter or Milan. Both have had a great championship anyway.
"Honestly I hoped more players could come through, but in recent years the situation hasn't changed: there are many good young people who can't find chances."
As for Italy's failings in World Cup qualification, Mancini is targeting a response from his side, who start their Nations League campaign at home to Germany on June 4.
"We absolutely didn't deserve to go out, but we have to accept defeat and start again," he continued.
"We know we don't have big choices, but we have to come up with something like what happened four years ago."