Spain face the Italians at the Olympic Stadium bidding to become the first national side to win three successive major honours following their triumphs at Euro 2008 and the World Cup in South Africa two years ago.
Balotelli, who scored both goals in Italy's 2-1 win over Germany in Thursday's semi-final in Warsaw, is at last on top form and joint leading scorer in the tournament with three goals. He must be stopped if Spain are to retain their title.
Barcelona's Fabregas, when at Arsenal, played against Manchester City striker Balotelli in the Premier League the season before last, and knows better than most members of the Spanish squad what his qualities are.
"I think he is a great player. He showed that yesterday," said Fabregas.
"He had two fantastic moments and scored two great goals. One a true center-forward's header and the other one from a real cracking shot from outside the area in a European Championship semi-final against a top team like Germany.
"This tells you everything. I really liked they way he played and he will be, of course, a threat as well as [Antonio] Cassano or any other forward who plays with Italy.
"They are always very dangerous, but we have the players to stop them. We have defended well. We have to neutralise their attack and midfield where [Andrea] Pirlo is the player, otherwise he will take control of the match.
"We have to be realistic about Sunday's challenge.
"We need to play at a high level and, basically, we need to be at an unbeatable level because up until today, nobody has been able to achieve three titles in a row and we have the possibility to do it.
"It takes a lot of years of work, humility, sacrifice and now is the time to enjoy these moments.
"As I said the other day, no matter what happens on Sunday, Spain has already made history.
"It is evident that this is not over yet because it is evident that our goal is to win this trophy.
"And even if we do lose, which can happen as we can't win all the time, we will go home very proudly knowing that we made every possible effort to win and if we win, we will enjoy the moment with everyone at home," he added.
