Flannery, who won his only cap as a substitute against Romania in November, has been given the nod ahead of Ulster's Rory Best who has been named on the bench.
David Wallace's form for Munster in the European Cup has earnt him a recall at the expense of Wasps openside Johnny O'Connor who must settle for a place on the bench.
Wallace, a powerful ball-carrying forward, won the last of his 22 caps during the summer tour to Japan and packs down alongside Simon Easterby and Denis Leamy in the back row.
Talisman duo Brian O'Driscoll, who resumes as skipper, and Paul O'Connell return to the side after missing the entire autumn series through injury.
Geordan Murphy overcame his Achilles injury to start at full-back with Tommy Bowe preferred to Andrew Trimble on the left wing.
Ireland boss Eddie O'Sullivan said: "It was a tight call between Jerry and Rory.
"Jerry has been in the Munster team and has had a good run of form. He just edged out Rory because of his performances in the European Cup.
"I've picked the form guys at the moment. David has forced his way in. We're be playing against a physical Italian pack so we selected a back row to meet that.
"David has played well in the last month or so and has forced his way into the team. He wasn't in the Munster team in the autumn and so wasn't picked then," added the British & Irish Lions coach.
Ireland team to face Italy at Lansdowne Road on February 4:
G Murphy (Leicester); S Horgan (Leinster), B O'Driscoll (Leinster, captain), G D'Arcy (Leinster), T Bowe (Ulster); R O'Gara (Munster), P Stringer (Munster); M Horan (Munster), J Flannery (Munster), J Hayes (Munster), M O'Kelly (Leinster), P O'Connell (Munster), S Easterby (Llanelli), D Wallace (Munster), D Leamy (Munster).
Replacements: R Best (Ulster), S Best (Ulster), D O'Callaghan (Munster), J O'Connor (Wasps), E Reddan (Wasps), D Humphreys (Ulster), A Trimble (Ulster).