As of Wednesday (5 June), passengers are now able to select male (M), female (F) or X (other), with some states now issuing gender-neutral passports.
Additionally, Air Italy has added Mx “for those who do not wish to define themselves with binary gender options”.
The airline says it is working with Italian LGBT association Arcigay on other inclusivity initiatives.
Last year, Iata approved changes to booking procedures to include non-binary gender options.
GDS provider Travelport last week revealed it was rolling out a new non-binary gender booking code.
Rossen Dimitrov, Air Italy chief operating officer, said: “Air Italy is determined to lead the industry in inclusivity, and we are so proud to be the first European airline to offer these inclusive booking options for our customers.
“Air Italy’s brand tagline is ’Imagine the world differently’. Within this is a vision that embraces every manifestation of freedom, inclusion, the acceptance of diversity and striving for progress. Our introduction of non-binary options on our website is therefore another demonstration of these important values.”
Gabriele Piazzoni, general secretary of Arcigay, added: "We are proud to cooperate with Air Italy, the first carrier in Italy to decide to make its airline inclusive and its aircraft welcoming places for all people.
“The decision of a first-tier airline like Air Italy to invest resources and time to focus on inclusivity is a positive example that we hope is followed by others. The civil progress of a country depends not only on its laws, but also by the way in which the private sector puts in place anti-discrimination initiatives that take into consideration the many differences that exist.”
