Mario Borghezio, who belongs to the Northern League party, condemned Mr Breivik's violence, but backed his stance against Islam.
The Northern League is a partner in PM Silvio Berlusconi's government.
Mr Borghezio's comments in a radio interview sparked outrage, with opposition calls for the MEP to resign.
Mr Breivik's justification for killing 76 people was that he wanted to inflict maximum damage on Norway's governing Labour Party because of its failure to clamp down on immigration.
"Some of the ideas he expressed are good, barring the violence. Some of them are great," Mario Borghezio told Il Sole-24 Ore radio station.
He agreed with Mr Breivik's "opposition to Islam and his explicit accusation that Europe has surrendered before putting up a fight against its Islamicisation".
The Northern League is an avowedly anti-immigration, regionalist Italian political party, key to the governing coalition, and known for its anti-Islamic rhetoric.
The controversy sparked swift reaction from fellow MEPs.
"My heart goes out to the victims of the atrocities that took place in Norway last week, and to their families. There can be no excuses, no justifications. This was nothing but an act of pure and unmitigated evil," said Nikki Sinclaire.
Ms Sinclaire resigned last year from the European Parliament umbrella group, Europe of Freedom & Democracy (EFD), which included her UK Independence Party, as well as Italy's Northern League. She cited the racism of Northern League members in making her decision.
"Mr Borghezio's reported comments are shocking and, if accurately reported, reprehensible. They are in no way reflective of UKIP's position or that of the EFD Group," said a UKIP spokesman.
But Mr Borghezio is not the only right-wing politician to express sympathy with the ideas of Anders Behring Breivik.
A member of France's far-right National Front party has been suspended after writing a defence of the Norwegian attacker on his blog.
Jacques Coutela described Mr Breivik as "the main defender of the West", comparing him to Charles Martel, a seventh century leader who halted Islamic expansion in western Europe.
"The reason for the Norway terror attacks: fighting the Muslim invasion, that's what people don't want you to know", read the post.
Mr Coutela stood as a National Front candidate in local elections in March.
"He was suspended today pending a party disciplinary committee," said Steeve Briois, the Front's general secretary.
Meanwhile, the leader of the English Defence League (EDL), Stephen Lennon, said the mass killing in Norway was a wake-up call.
"What happened in Oslo shows how desperate some people are becoming in Europe," said Mr Lennon, who was convicted earlier this week of leading a brawl involving 100 football fans.
"It's a ticking time bomb. If they don't give that frustration and anger a platform as such and a voice - and a way of getting emotion out in a democratic way - it will create monsters like this lunatic."
The EDL is also known for its strong stance against immigration.
Mr Breivik has posted admiring comments online about the EDL.
The League leadership is checking his claims to have contacts among its members.
Correction 28 July 2011: This story originally said that Mr Borghezio had shown sympathy with the actions of Mr Breivik; that has been changed to "ideas" rather than "actions".

16 March 2017 Last updated at 09:20 GMT
Well Ricky has been speaking to 12-year-old Junior who loves to dance, but it made him very unpopular with bullies.
He ignored them and has since gone on to become the UK's Freestyle Street Dance champion.
And even got a chance to dance with singer Justin Bieber.
Junior has been telling his story as a part of BBC's School Report News Day where young people get a chance to do just that and report with the BBC.
Hundreds of schools all over the UK are turning their classrooms into newsrooms for a day.
Take a look at Ricky's chat.
An Italian MEP has described the ideas of Norway's self-confessed mass killer, Anders Behring Breivik, as "good" and in some cases "excellent".
[NEXT_CONCEPT]
What would you do if something you loved made you a target for bullies?