Can you use US dollars in Italy?

Italy is part of the European Union and uses the euro, the common currency of that confederation.

While US dollars are sometimes acceptable you'll usually get a terrible exchange rate from merchants, hotels, etc. because the euro is almost as widely used in the world and is perceived by some to be becoming a stronger currency. Trying to pay a bill with US dollars in Europe is becoming about as common as trying to pay a bill in the US by using British pounds; i.e. not at all.

It's far better to use a credit card or take euro cash out of an ATM, provided you're careful about minimizing any surcharges imposed by the banks involved. Some credit cards charge 2 to 5% for converting between euros and dollars, and some banks impose a similar fee when withdrawing from an ATM, so you'll need to shop around.