Grayson, 32, steps into the fly-half position vacated by Wilkinson who will undergo shoulder surgery later this week.
England head coach Sir Clive Woodward has also switched World Cup final try-scorer Jason Robinson from wing to centre on Sunday, with Bath's Iain Balshaw brought in at full-back instead of Josh Lewsey who features on the wing with Ben Cohen.
Gloucester scrum-half Andy Gomarsall has beaten off Matt Dawson's challenge - while in the pack, there are starts for lock Danny Grewcock and flanker Joe Worsley.
On the bench, uncapped Sale Sharks forward Chris Jones features - as does Bath fly-half Olly Barkley and Gloucester's former rugby league star Henry Paul.
Paul's solitary England cap came against France in Paris almost two years ago.
Four of England's World Cup final starting line-up will not be involved in Rome next weekend.
World Cup captain Martin Johnson has retired from Test rugby, Wilkinson and centre Mike Tindall are both injured, and flanker Neil Back has been dropped from England's RBS 6 Nations squad.
With Worsley called in as Back's replacement, Richard Hill switches to openside flanker and captain Lawrence Dallaglio is at his accustomed number eight.
"The starting XV are all guys who have been involved with the World Cup, and I expect them to move very swiftly into gear," said Woodward.
"It was interesting selecting the side, and there are new players coming into a World Cup-winning team.
"Some changes were made due to injury and some through retirement. But I'm very excited about the team and looking forward to working with Lawrence Dallaglio as captain."
Harlequins centre Will Greenwood, who needs one touchdown to overtake Jeremy Guscott as England's second all-time highest Test tryscorer, will be vice-captain.
"He's a tremendous leader behind the scenes and has always helped out Jonny Wilkinson in that role," added Woodward.
"With Jonny not being available, it's important Will steps into the frame - especially in our attacking play."
Considerable interest will surround Robinson's appearance in the centre. But Woodward has resisted all temptation at fly-half, where Bath's Olly Barkley and Wasps number 10 Alex King were both candidates.
Jones, meanwhile, is the only uncapped player in Woodward's first Test match 22 since the World Cup triumph. The 6ft 6in 23-year-old, who can play second row or back row, has a big future.
Gloucester wing James Simpson-Daniel's run of bad luck shows no sign of ending, though.
After suffering glandular fever last season and then narrowly missing out on World Cup selection several months later, he now has a rib injury and was not considered for selection.
England team to play Italy in the RBS 6 Nations opener in Rome on Sunday:
I Balshaw (Bath); J Lewsey (Wasps), W Greenwood (Harlequins), J Robinson (Sale Sharks), B Cohen (Northampton); P Grayson (Northampton), A Gomarsall (Gloucester); T Woodman (Gloucester), S Thompson (Northampton), P Vickery (Gloucester), D Grewcock (Bath), B Kay (Leicester), J Worsley (Wasps), R Hill (Saracens), L Dallaglio (Wasps, captain).
Replacements: M Regan (Leeds), J Leonard (Harlequins), S Borthwick (Bath), C Jones (Sale Sharks), M Dawson (Northampton), O Barkley (Bath), H Paul (Gloucester).