The Liverpool midfielder was introduced at the outset of the second half of extra-time in an enthralling contest at Wembley.
Federico Chiesa’s opening goal on the hour mark had been levelled by Alvaro Morata 10 minutes before the end of normal time.
After a goalless additional 30 minutes, during which Thiago was sent on from the bench, a shootout was required to separate the teams.
Thiago converted Spain’s third kick from 12 yards but it was the Italians who triumphed 4-2 to reach Sunday’s final, where they will face either England or Denmark.