England manager Roy Hodgson
England manager Roy Hodgson has "great confidence" his side can qualify for the last 16 of the World Cup despite losing 2-1 to Italy in Manaus.
Daniel Sturridge cancelled out Claudio Marchisio's opener for Italy, but Mario Balotelli gave the Azzurri victory.
"It was undoubtedly the best I have seen us play, as a team, in my time with them," said Hodgson.
"It's tough to accept we lost. But I've got great confidence we can do well enough in the next games to qualify."
England face Uruguay on Thursday before concluding their Group D campaign against Costa Rica on Tuesday, 24 June.
Hodgson said there was a "good chance" England would get the results they needed if they reproduced the same level of performance in those remaining games, while opposite number Cesare Prandelli described them as "one of the strongest teams in the World Cup".
England fell behind when Marchisio drilled home from 25 yards after Andrea Pirlo's clever dummy to give Italy the lead, but Sturridge levelled less than two minutes later from an excellent Wayne Rooney cross.
Balotelli had the last word, however, the former Manchester City forward escaping from Gary Cahill to score with a simple header.
But Hodgson told BBC Sport: "Of course we can still qualify. We're a bit downhearted at the moment, a bit sad that the game didn't go our way - we were hoping for a perfect start but we don't live in a perfect world. In the second half, we did everything but score.
"We know we played against a good team and to take them so close gives us great confidence that we can do well against Uruguay and Costa Rica and still progress in the tournament."
Prandelli, whose side knocked England out of Euro 2012 on penalties after dominating that match during the 90 minutes and extra time, said: "We don't have players who are as powerful as England's but we have technically skilled players, and in the first half we had better ball possession.
"Until just a few years ago, England relied on long balls but they are now a skilled team with excellent triangular passing."
England captain Steven Gerrard played in that match in 2012 and believes the display on Saturday showed significant improvements have been made.
"We got criticised two years ago for sitting back and being a bit toothless," he said. "Anyone who watched the game tonight could see how we were trying to create. We pushed and pushed. We gave it everything we have got and we were unlucky not to get anything out of it.
"The result does put a lot of pressure on getting a result against Uruguay but no matter what the result was, we would still have had to go and beat them anyway. The challenge is a bit more difficult but it is certainly doable."
While Hodgson was keen to focus on the positives to be taken from the defeat, he accepted there were areas where his side could improve.
"We are not the sort of team to sit back and, unfortunately, it left one or two opportunities for Italy to get the ball in," he said.
"And our final ball was a bit disappointing - we're better than that. Towards the end when we were desperate for that goal I thought there were several situations where we were in good crossing or shooting positions and we didn't take advantage of it, and that's something we need to work on.
"But we are a young team and this is the first World Cup for almost two thirds of the team, so I think this is something we will improve upon."
Liverpool winger Raheem Sterling, 19, started in a central role, just behind team-mate Sturridge.
Rooney was switched to the left flank, from where he created Sturridge's equaliser before spurning a golden chance to level.
Hodgson said: "I thought Raheem Sterling was very dangerous throughout the game. Danny Welbeck had some good moments and Steven Gerrard and Jordan Henderson did everything expected of them.
"I thought Wayne did very well. We know he can play in different positions and he can be satisfied with his performance."
Sterling's performance - he was rated man of the match by BBC Sport's chief football writer Phil McNulty - also brought high praise from former England defender Rio Ferdinand.
"England might have lost but the performance of Raheem Sterling was amazing to see," said Ferdinand, a BBC Sport pundit in Brazil.
"He was the star man for us, the go-to guy.
"For a young guy like him to get a lot of responsibility - in terms of us giving him the ball and telling him to go out there and do something - bodes well for the future."
England are third in the group after the opening round of fixtures as Uruguay were surprisingly beaten 3-1 by Costa Rica.