Mallett saw the Azzurri's hopes of qualifying for the knockout stage for the first time crushed by a 36-6 defeat at Otago Stadium.
Ireland finish the group phase as Pool C winners and will now meet Wales in the quarter-finals.
And Mallett believes they are a team to be feared and can progress far in the tournament.
"Wales have played some great rugby and went very close to beating South Africa. It should be an exciting game," he said.
"My view is that Ireland didn't come into his World Cup as big favourites because they lost four games (in the build-up).
"But they targeted Australia and ourselves as key games. Once they get into the quarters and semis, they've got a team that can knock over anyone on that side of the draw.
"No team can be confident playing against Ireland at the moment and say we've got a genuine chance of beating them. Where is their weakness?"
Mallett, overseeing his final match in charge after four years as Italy coach, accepted his men were well beaten by a superior side.
"The Irish were just a great deal better team than we were," he said.
"Their loose forwards Sean O'Brien and Stephen Ferris were hitting the line really hard, but it wasn't just them.
"Their front five played very well. They backs controlled the game very well, never allowing us time or space. They never played rugby in their half.
"It was a tough game for us. I was proud in the first half, but we were properly outplayed in the second half."
Mallett was stunned by the support Ireland received from the 25,000 strong 'Blarney Army' with most of Otago Stadium covered in green.
"This was like playing at Lansdowne Road. There was a mass of green across the stadium," he said.
"Every New Zealander must have pout his green jersey on because I don't believe there are that many Irishmen who have that many Euros left to come to New Zealand."
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