Trevor Clevenot was France's creative all-round star after he top-scored with 17 points, including two blocks, while Earvin Ngapeth chipped in with 15 as the hosts won 25-20, 25-21, 25-21.
But it was their defensive performance to stop Italy's lethal attack that ultimately saw them through to the final where they will face Poland, who beat the United States in a five-set thriller earlier on Wednesday.
"It's already incredible to win a medal here in France in front of this crowd. Now we're greedy, aren't we?" Clevenot said.
"We're going to enjoy this a little bit. We're going to get a bit of a thrill out of it and then we'll go for it.
"The team did an extraordinary job. We managed to extinguish this Italian collective, which is very strong. The whole team was monstrous!"
After taking the first set, France were down 16-13 in the second but fuelled by a rocking home crowd, the hosts mounted a comeback to surge into the lead.
Yacine Louati then served an ace on set point which caught the line to leave the shell-shocked Italians with a huge mountain to climb.
Yuri Romano was the only Italian to hit double figures with 10 points but they were simply unable to find a way through on most rallies as the towering French stood firm at the net.
On the other hand, everything seemed to be going right for the hosts, particularly for Clevenot who not only used his power but also his finesse and deft touches to breach the Italy defence.
As France brought up match points, Italy saved five but the crowd did their bit by belting out the national anthem 'La Marseillaise' with full vigour before Ngapeth sealed victory to spark wild celebrations in the stands.
Italy have won the joint most Olympic medals in men's volleyball but never gold, with three silver and three bronze.
They will look to win another bronze when they face the United States for third place on Friday. The gold medal match will be played on Saturday.
