The mandatory measure was introduced amid rising cases in the country, which was one of the first in the world to be badly affected by the pandemic in spring 2020.
In a statement released by the government on Wednesday, Prime Minister Mario Draghi said: "We want to slow down the growth of the contagion curve and push the Italians who have not yet vaccinated themselves to do so. We take action in particular on the age groups that are most at risk of hospitalization to reduce the pressure on hospitals and save lives."
Draghi argued that the new measure -- effective immediately and in place until June 15 -- is necessary to "preserve the proper functioning of hospitals and, at the same time, keep schools and businesses open".
Italy has registered more than 138,000 coronavirus deaths since the outbreak began in February 2020, the second-highest toll in Europe after Britain. It recorded 189,109 new Covid-19 cases on Wednesday, a record high increase since the beginning of the pandemic, according to the health ministry data.
Unvaccinated workers who are 50 years old or over risk being fined between 600 and 1,500 euros, under Italy's new coronavirus decree, a government source told CNN on Thursday.
After five days they will lose their salary but will not be fired from their position. This means they can receive pay again if they get vaccinated.
For unvaccinated over 50s that are unemployed or retired, there will be a fine of 100 euros, the source said. As of writing, the final text of the decree has yet to be published.
Around 74% of Italians have received at least two vaccination shots and 6% have had just one shot, according to Our World in Data. Some 35% have had a third "booster" shot.
Italy joins a few other countries in Europe in introducing compulsory vaccination. Austria has announced plans to make vaccination mandatory for those over 14 years old from next month, while over-60s in Greece will also have to get the vaccine from January 16.
Meanwhile in France, Prime Minister Jean Castex said Thursday the country's proposed vaccine pass would be "much more effective" than mandatory vaccination, in an interview with CNN affiliate BFMTV.
His comments came after lawmakers in France's lower house approved a bill Thursday that aims to make it mandatory for people to show proof of being vaccinated to access many public venues and inter-regional public transport. The bill, once passed by the Senate, would remove the option of being able to show a negative test result instead.
Differentiating the two, Castex said the country's "objective is to get people vaccinated, it's not to fill the state coffers."
"The objective is the most vaccinated people possible. Mandatory vaccination is a means, a tool, a final tool," the PM added.
He gave the example of some people in low income neighborhoods who may choose to avoid medical care in general and who were not ideologically opposed to vaccination.
"Fining people like that will not help us to achieve our [vaccination] objectives," Castex said.