Giuseppe Mastini, 57, was sentenced to life in jail in 1989 after a notorious criminal career of murder, kidnapping and robbery in which he "terrorised Rome" for almost 15 years, La Repubblica daily said.
He had escaped from prison twice in the past and absconded during a previous day release, it said.
The killer, whose life has inspired a song and film about him, had been serving time in Fossano prison in northern Italy but had been on day release for the last eight months to allow him to work.
Mastini is believed to have hopped into a car at a station on Friday morning instead of catching the train to work. Police launched the manhunt when he failed to return to jail at nightfall, the Corriere della Sera said.
Nicknamed "Johnny the Gypsy" because he was born into an itinerant family, Mastini killed his first victim in 1975 when a robbery went wrong. He was 15 years old at the time.
The teenager was taken to a lock-up for juveniles but absconded in 1976 after attacking a guard. He was caught and taken to another prison, from where he escaped again in 1981, before being captured once more in 1983.
In 1986 Mastini was given a day release for good behaviour and went on an armed robbery spree which ended in the kidnap of a girl and the murder of two men, one of whom was a policeman.