The draw which was held in Montreux, Switzerland put Italy and France along with Ukraine, who qualified to the 2006 World Cup in Germany, in what was described as "group of death".
France lifted the Euro 2000 trophy which took place in Holland-Belgium after snatching a dramatic 2-1 victory over Italy thanks to a David Trezeguet golden goal in extra time.
"You can't say a draw is good or bad - you have to play the games first," France boss Raymond Domenech was quoted as saying by UEFA's official website.
"I'm pleased to play against a big team like Italy. I've wanted to play them for a long time.
"You can't say it will be easy, because I remember how people thought we would qualify easily for the World Cup and see what happened," he added.
Italy coach Marcello Lippi said Italy have a lot of work to do after the World Cup to ensure their qualification to Euro 2008.
"Our group is very exciting and very difficult. There are strong teams with great tradition like France, while Ukraine were probably the best side in qualifying for the 2006 World Cup," he said.
"However, at this moment, I can only focus on our opponents in Germany," he added.
In other groups, Germany were drawn with Czech Republic while England and Croatia will meet again after their clash in Euro 2004.
Holders Greece's toughest opponent will be Turkey while Holland will take on Portugal in the qualifiers.
Euro 2008 qualifying groups:
Group A: Portugal, Poland, Serbia-Montenegro, Belgium, Finland, Armenia, Azerbaijan, Kazakhstan
Group B: France, Italy, Ukraine, Scotland, Lithuania, Georgia, Faroe Islands
Group C: Greece, Turkey, Norway, Bosnia-Herzegovina, Hungary, Moldova, Malta
Group D: Czech Republic, Germany, Slovakia, Republic of Ireland, Wales, Cyprus, San Marino
Group E: England, Croatia, Russia, Israel, Estonia, Macedonia, Andorra
Group F:Spain, Sweden, Denmark, Latvia, Iceland, Northern Ireland, Liechtenstein
Group G:Netherlands, Romania, Bulgaria, Slovenia, Albania, Belarus, Luxembourg