The 27-year-old Read had been widely expected to be given the captaincy for at least one match on the end-of-season tour as Hansen had said he wanted every player in the 32-man squad to get game time, which would allow giving McCaw a rest.
McCaw, 31, who led the team in their 51-22 victory over Scotland last Sunday, has dropped out of the squad altogether with Sam Cane to start at openside flanker.
"We were happy with our performance last weekend against Scotland but also knew there were areas for improvement ahead of the Italian Test and we have been working on getting that right this week," Hansen said.
"The team last week put a stake in the ground, and while the performance was nowhere near perfect, there was some quality rugby played. There is now an opportunity for this group to build on that."
Hansen's wholesale changes to the side include naming regular fly-half Beauden Barrett to start at fullback.
Barrett slotted into the position seamlessly last Sunday when he came on as a substitute for the Israel Dagg, who was not considered for the Italy match due to bruising he sustained after a heavy fall.
Utility back Ben Smith, who would have normally been expected to slot into full-back, was also not considered after he suffered an injury to his cheek while playing against Scotland.
His centre partner Tamati Ellison was also not considered due to a toe injury so Hansen re-instated veteran duo Ma'a Nonu and Conrad Smith, while he picked Hosea Gear and Julian Savea to start on the wings.
The former Wales coach also expected a tough confrontation from Italy's forwards so shook up his pack, with regular first choice players Tony Woodcock and Keven Mealamu returning to the front row with Charlie Faumuina starting at tighthead prop.
"We are expecting another torrid Test against the Italians in front of their passionate fans," Hansen added.
"They are renowned for their forward play so they will certainly be up for the challenge and we will have to match that physicality."
Veteran lock Ali Williams also makes his first start in the Test side since last year's World Cup after he was used as a substitute during Tests against Ireland in June and then had to recover from knee surgery.
He joins Brodie Retallick in a new locking combination after Sam Whitelock and Luke Romanao started at Murrayfield on Sunday.
Blindside flanker Liam Messam replaces Adam Thomson, who was suspended for making contact with the head of Scotland's Alasdair Strokosch, though Messam had been expected to start the match anyway, irrespective of Thomson's ban.
Francesco Minto will make his debut for Italy, meanwhile, as one of eight changes to the team for a match coach Jacques Brunel compares to climbing Everest.
"New Zealand are the Everest of rugby," Brunel told a news conference on Thursday. "We are climbers who have to scale the most difficult mountain without fear, ready to brave the cold and the bad weather. Otherwise, we might as well stay calmly on Mont Blanc."
World champions New Zealand have beaten Italy 13 times in as many meetings and Brunel said the game at Rome's Olympic Stadium would show how much progress his team had made.
"For us it will be an important game to find out what our level is compared to the strongest team in the world, whether we are far from them or close," the Frenchman said.
"The All Blacks are the stiffest test to show us in which direction our work needs to go."
As well as adding Minto to the back row, Brunel will welcome back wing Mirco Bergamasco, who missed Saturday's 28-23 defeat of Tonga with a muscle problem.
Wing Giovambattista Venditti, who was on the bench against Tonga, will play and Luciano Orquera will start for the first time under Brunel, replacing Kristopher Burton.
Captain Sergio Parisse and Martin Castrogiovanni will earn their 90th caps in the game.
New Zealand: 15-Beauden Barrett, 14-Hosea Gear, 13-Conrad Smith, 12-Ma'a Nonu, 11-Julian Savea, 10-Aaron Cruden, 9-Aaron Smith, 8-Kieran Read (captain), 7-Sam Cane, 6-Liam Messam, 5-Brodie Retallick, 4-Ali Williams, 3-Charlie Faumuina, 2-Keven Mealamu, 1-Tony Woodcock
Replacements: 16-Dane Coles, 17-Wyatt Crockett, 18-Ben Franks, 19-Sam Whitelock, 20-Victor Vito, 21-Tawera Kerr-Barlow, 22-Daniel Carter, 23-Cory Jane
Italy: 15-Andrea Masi, 14-Giovambattista Venditti, 13-Tommaso Benvenuti, 12-Alberto Sgarbi, 11-Mirco Bergamasco, 10-Luciano Orquera, 9-Edoardo Gori, 8-Sergio Parisse (captain), 7-Simone Favaro, 6-Alessandro Zanni, 5-Francesco Minto, 4-Antonio Pavanello, 3 Martin Castrogiovanni, 2-Leonardo Ghiraldini, 1-Andrea Lo Cicero
Replacements: 16-Davide Giazzon, 17-Alberto de Marchi, 18-Lorenzo Cittadini, 19-Quintin Geldenhuys, 20-Mauro Bergamasco, 21-Robert Barbieri, 22-Tobias Botes, 23-Luke McLean