"We want to bring the light and not fire to the world," said Rome's chief rabbi, Riccardo Di Segni.
"The story of Chanukah reminds us of a military victory but the symbol is a spiritual one, it's a peaceful witness to the fact that we exist," he added.
Two of the people who lit the candles were World War II concentration camp survivors, and a third was an Iranian Jew.
Lighting candles for tradition and in protest (Photo: AP)
The chief rabbi said the demonstration was a peaceful response to comments by Iranian President Mahmoud Ahmadinejad, who said earlier this month that the Holocaust was a "myth" and that if Europeans insist it did occur, then they should give some of their own land for a Jewish state, rather than the one in the Middle East.
The comments came just two months after Ahmadinejad called for Israel to be "wiped off the map" - comments that prompted Italians from the right and left to demonstrate in front of the Iranian Embassy in huge rally.
About 50 people took part in the candle lighting, although they were outnumbered by police and journalists. There were no lights on in the embassy at the time.
'Italy supports Israel in almost every arena'
An Israeli Embassy official told Ynet Wednesday that he sees the candle lighting as a continuation of the same line against the anti-Israel remarks and the Holocaust denial.
"Even if this is only about lighting a Chanukah lamp, it has a very specific connotation," he said.
"The Jewish community in Italy organized the event and has shown a lot of interest in all the arenas in the country, including the political arena."
Italy's Jewish community consists of approximately 30,000 people, 12,000 of them in Rome.
A source at the Israeli Embassy explained that "Italy is a country which has relations with the Arab and Muslim world, including with Iran, parallel to its relations with Israel."
"The mutual trade relations between Italy and Iran are evaluated at approximately USD 4 billion a year. Nonetheless, in a recent meeting between President Moshe Katsav and Italian Prime Minister Silvio Berlusconi, the Italians said that the moral concerns surpass the economic ones," the source said.
"Thus, one can understand the condemnation of Ahmadinejad's remarks, and therefore Italy officially took part in the demonstrations," he added.
As for Italy's stance toward Israel these days, the source explained that "Today Italy supports Israel in almost every arena due to Berlusconi's rise to power and his more realistic approach, which is closer to the American narrative."
The Associated Press contributed to the report