(CNN) -- Italy's World Cup title defense came to an embarrassing end with a dramatic 3-2 defeat by European footballing minnows Slovakia on Thursday.
The four-time champions followed 2006 runners-up France in making a first-round exit despite a frantic finale in which they had a goal disallowed.
It is the first time that both finalists from the previous tournament have departed at such an early stage of soccer's biggest event, and only the fourth occasion that the titleholders crashed out at the opening hurdle.
France were the last champions to exit in the first round in 2002, following Brazil in 1966 and Italy in 1950 -- having won the 1938 event before World War Two broke out.
Slovakia progressed into the last 16 along with Paraguay, who topped Group F following a 0-0 draw with New Zealand.
The Kiwis were knocked out of the tournament despite finishing unbeaten with three draws -- a sharp contrast to their only other finals appearance in 1982 which ended with three defeats.
Slovakia 3-2 Italy
Striker Robert Vittek scored two goals to help put World Cup debutants Slovakia into the second round with a famous victory in Johannesburg.
The striker put his side ahead in the 25th minute with a smart finish after Italy's Daniel De Rossi gave the ball away to Marek Hamsik, who plays for Serie A club Napoli.
He made it 2-0 with 17 minutes to play after again being set up by Hamsik, but Italy kept their hopes alive when Antonio Di Natale bundled in an 81st-minute goal after a shot by substitute Fabio Quagliarella was only parried.
Quagliarella thought he had equalized with five minutes to play, but his effort was ruled offside in a tight decision.
Zdenko Strba had suffered a gaping wound in his knee just before halftime after a challenge by Gennaro Gattuso, but soldiered on until just before the end for the Slovaks.
His 86th-replacement Kamil Kopunek scored with his first touch of the ball when he coolly lifted the ball over onrushing goalkeeper Federico Marchetti, who was again deputizing for injured first-choice Gianluigi Buffon.
Quagliarella, who had a shot cleared off the line by Martin Skrtel in the 66th minute, finally got his reward in time added on with a sublime chip over goalkeeper Jan Mucha.
But it was too late for Italy, whose coach Marcello Lippi suffered an ignominious defeat after the highs of 2006 when he led his side to victory in a penalty shootout in the final against France.
"I take full responsibility. There are no excuses because when a team comes to something as important as tonight's game with terror in their legs, their heads and their hearts, and they don't manage to express themselves, it means that the coach hasn't prepared them in the right way from a psychological, technical and physical perspective," Lippi said, reported AFP.
Paraguay 0-0 New Zealand
Paraguay made up for a first-round exit four years ago with a comfortable draw against New Zealand in Polokwane.
The South Americans knew a point would be enough to progress following an opening 1-1 draw with Italy and a 2-0 victory over Slovakia.
The Kiwis needed to secure their first ever victory at the World Cup, but struggled to create clear-cut chances in a match of few opportunities.
Paraguay coach revamped Gerardo Martino his forward line-up with Lucas Barrios replaced by Oscar Cardozo, but his players found New Zealand's stubborn three-man defense as difficult to break down as the Italians and Slovaks had previously.
Paraguay will play the runners-up in Group E on Tuesday, while Slovakia will play that pool's winners the day before.