With Italy frustrated for 90 minutes by a heroic North Macedonia defensive performance, Aleksandar Trajkovski struck the only goal of the game in the second minute of added time, inflicting Italy's first defeat in 60 home World Cup qualifiers.
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The victory in Palermo means North Macedonia, ranked 60 places below four-time World Cup champions Italy in the FIFA rankings, will now take on Portugal and Cristiano Ronaldo in the playoff final on Tuesday with a place in Qatar on the line.
"It's hard to say something right now, I don't know what to say," Mancini told reporters.
It is also a shock for Italy after having won the delayed 2020 European Championship last summer against England in dramatic fashion in Wembley.
"Last summer was the most beautiful joy, now comes the greatest disappointment. It is not easy to think of other things, I am very sorry for the boys: I love them much more tonight than in July.
"I am the coach, I am the first responsible, the boys are not. They have a great future, they are strong players for the future of the national team. We did not deserve this defeat."
Italy had 32 shots at goal to North Macedonia's five but it was not as if visiting goalkeeper Stole Dimitrievski had the game of his life. He did not have a difficult save to make, and the home side not scoring was down to their own wastefulness.
"I'm proud of my teammates, we are all destroyed and broken but we have to start again,'' Italy captain Giorgio Chiellini said. "At the moment it's difficult to talk about it, it will remain a great hole.
"I hope that the coach will stay because he is essential for this team. Now we have to return to winning, go to the Euros and in four years time return to this blessed World Cup.''
Missed opportunities were ultimately the story of the Azzurri's campaign, with Mancini's side only in the playoffs after Jorginho missed a penalty against Switzerland last year that would have given them a win to qualify automatically.
"It is a huge disappointment," Jorginho told Italian outlet Rai Sport after Thursday's loss. "It hurts, it hurts so much.
"We have always created and dominated matches but we have not been able to finish teams off. It is not to blame anyone in particular but it is the reality.
"I don't know why we haven't been able to do this, I am also involved in this, and it hurts me to think about it."
North Macedonia coach Blagoja Milevski could see the irony of their last-gasp victory.
"We won Italian style against the Italians, a goal with two shots on target," he told reporters. "I'm very happy for this victory, I'm proud for these guys."
Information from Reuters was used in this report.