Poland and Ukraine have been chosen to host the Euro2012.
Italy were widely expected to win the Uefa vote in Cardiff, with another joint bid from Croatia and Hungary also in the running.
However, Italy's bid was overshadowed by last season's referee corruption scandal and their on-going problems with hooliganism.
It will be the first time that either Poland or Ukraine have hosted a World Cup or the Euro.
Uefa president Michel Platini said:
"Today Poland and Ukraine has been chosen by the Uefa executive committee to host Euro2012 and they are surely a worthy winner.
However there are no losers today, rather only bids that have not won this time round.
I cannot speak highly enough of the effort that has been made, and the passion for football we have seen in all three bids."
Platini's announcement prompted scenes of jubilation in the host countries of Poland and Ukraine.
Polish Football Association chairman Michal Listkiewicz said:
"There are 85 million people now waiting for this big football event.
The friendship between our nations has a very long history. This big tournament will be an important milestone in the history of our two Slavic nations."
His comments were echoed by Ukrainian football federation president Hryhory Surkis:
"This is a decisive day for our country. It will provide new opportunities for our country as it strives to integrate with Europe."
Poland and Ukraine's bid team staged an impressive presentation on Tuesday, featuring Chelsea striker Andriy Shevchenko, Liverpool keeper Jerzy Dudek as well as boxer Vitali Klitschko, former Olympic champion Sergei Bubka and Ukraine president Victor Yushchenko.
Nonetheless, the bid was still considered the outsider of the three.
Poland is still recovering from a match-fixing scandal and its government has been warned by Uefa and Fifa about political interference in the country's football governing body.
Meanwhile, Ukraine has been hit by a political crisis, with the president trying to dissolve parliament.
Nigel Adderley, a BBCreporter said: "It's a massive slap in the face to Italian football. The complete outsiders will host Euro 2012, and Italy are beaten.
Only last night, members of the Uefa executive committee seemed to be saying they would go for a safe pair of hands.
They were hinting that although Italy has had problems, they still felt it is place that can develop a tournament and has the experience."
Uefa chief executive Platini is keen to redress the balance of power in football throughout Europe and he appears to be supported by Uefa's 14-man executive committee.
According to Uefa sources, Poland and Ukraine won in the first round of voting with eight of the 12 votes while four went to Italy and none to Croatia and Hungary.
It will be first time the former eastern bloc has hosted the tournament since Yugoslavia in 1976.
Poland's Dutch head coach Leo Beenhakker said the decision was hugely important for the game in the winning countries.
Beenhakker said:
"Eastern Europe has a great history in sport and in football and they still have great players but what they have been missing has been good infrastructure, stadiums and training facilities.
Now the governments and the football federations are obliged to realise all their promises within the next five years and make these improvements.
This is an important step for the development of football in Poland and the Ukraine."
Games will be played in four Ukrainian cities (Dnipropetrovsk, Donetsk, Kiev and Lviv) and six Polish venues (Gdansk, Krakow, Poznan, Warsaw, Wroclaw and Chorzow).
Kiev's Olympic Stadium, used to host football at the 1980 Moscow Olympics, is the proposed venue for the final.