The 21-year-old Manchester City star has been included in Prandelli's squad despite several moments of injudicious behaviour on and off the pitch last season.
However, Prandelli, who is desperately light of striking options, made it clear that Balotelli was on probation.
"In my opinion, he has to see it as an extraordinary occasion for him as it is for the national side," said Prandelli.
"It is a time for him to be written about for what he does on the pitch and not what he has done off it."
Prandelli added that in the bigger picture he did not see Italy winning the tournament - they last reached the final in 2000 - but certainly restoring some of the lustre lost when they became the first defending champions to go out in the World Cup finals group stages in 2010.
"We are not going to win Euro, but I like to say that the Italians know how to surprise," said the 54-year-old, who replaced Marcello Lippi after the 2010 World Cup debacle.
"I would like to show that the team has at least worked well and which is arriving at this Euro knowing it is experiencing a unique moment with a smile on its lips."
Italy have been drawn in Group C alongside defending champions Spain, 2008 quarter-finalists Croatia and the Republic of Ireland and get their campaign off on June 10 against the Spaniards.