Yes, they did. You can find information at the sites below. Germans called them "military internees" (rather than prisoners of war), and forced many to work for them. There were also a number of Italian Jews who were put to work, but these were handled differently, by both the Italians and the Nazis. (The Italians saw the Jews as useful for their economy, and so protected them in some instances; Italy also saw German attempts to guide their treatment of Jews as infringing on national sovereignty.)
To find more on this, work with how you're phrasing your search: try Italian labor, Italian forced labor, etc.