Abu Omar was kidnapped "exclusively" by CIA agents and "was never in the hands of the Italian authorities," Paolo Accardo, lawyer for the Italian government, told the European Court of Human Rights in Strasbourg.
Omar, also known as Osama Mustafa Hassan Nasr, brought the case after kidnapping convictions against top Italian spies were overthrown on appeal last year.
His was one of the most notorious cases of the West's "extraordinary rendition" programme, in which terrorist suspects were kidnapped and taken to countries where they could be tortured and illegally detained with impunity.
The kidnapping in broad daylight by an ally of Italy became a scandal in the country when it was revealed.
In 2012, 22 CIA agents and a US army officer were sentenced in absentia to between seven and nine years in prison, but were never extradited.
Several members of the Italian military intelligence service Sismi were also convicted, including its top two officials, Marco Mancini and Nicolo Pollari, who received nine and 10 years in prison, respectively.
However, these convictions were quashed on appeal in February 2014, on the basis that the evidence should have been covered by state secrecy laws.
He also criticised Rome for failing to seek the extradition of the convicted US agents.
Italy's lawyer responded that states only seek extradition "if there is a realistic chance of success."
Omar, who now lives in Egypt, was also convicted in absentia by an Italian court in 2013, sentenced to six years in prison for criminal association and plotting international terrorist attacks.
He had political asylum at the time of his kidnapping in 2013. He was allegedly taken by the CIA to the Aviano US air base in northeast Italy, flown to a US base in Germany, and on to Cairo.
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