The European Commission will also send a team in to review the Italian government's books to bring the country's deficit into balance.
Italy's debt is at 120 percent of its gross domestic product.
The country's debt load is $2.5 trillion, about $1.1 trillion more than the amount European leaders set last week as the size of the European Financial Stability Facility, a fund meant to help rescue struggling eurozone countries.
The New York Times reported Friday Italy had succumbed to pressure at the Group of 20 Nations meeting in Cannes, France.
Italian government officials had said earlier that Italy would accept advice from the IMF, but not monitoring.
German Chancellor Angela Merkel said none of the G20 nations in Cannes had agreed to contribute to the EFSF.
Russia and China, both flush with cash, were in favor of having Italy's finances monitored by an objective party, particularly as the Europen Commission is seeking outside financial assistance.
Similar to Greece, opposition to austerity budgeting in Italy is building with recent defections in Parliament threatening Premier Silvio Berlusconi's thin majority.
ANSA reported Berlusconi presented a package of austerity measures to European heads of state last week, including pledges to introduce two bills in the Italian Parliament. One would make it easier to fire workers. The other would raise the retirement age from 65 to 67.
With investor confidence waning, yields have been rising on government bonds.
With a previous austerity package -- one passed in September that set 2013 as the year Italy would have a balanced budget -- the government was able to persuade the European Central Bank to buy Italian bonds, which put downward pressure on Italy's borrowing costs.
However, some economists call attention to a caveat. By trimming its budget, Italy could be making it harder for its economy to get back on its feet because the government is a primary provider of jobs and spending.
The IMF is already monitoring finances in Ireland, Portugal and Greece. Stepping in to keep an eye on Italy is a strong admission that the country is having trouble making necessary corrections alone.
Couple mistakenly served bag of cash at McDonald's drive-thru
Benedict Cumberbatch's dramatic reading of R. Kelly lyrics is just what you need