Managua said it was severing diplomatic relations after Rome criticised it for harbouring a Red Brigades terrorist convicted of the murder of ex-PM Aldo Moro.
The Central American nation on Thursday it was cutting ties with Italy after Foreign Minister Antonio Tajani slammed the government for sheltering a man convicted of assassinating an Italian prime minister almost 50 years ago.
Alessio Casimirri, 74, was sentenced in absentia to six life terms in prison for kidnapping and killing Aldo Moro in 1978.
Casimirri arrived in Nicaragua in 1983 and obtained citizenship five years later, and in 2004, the country's Supreme Court refused an Italian extradition request.
Speaking at a conference in Madrid on Wednesday, Tajani denounced the Nicaraguan government for continuing to harbor Casimirri.
