Rossi has scored six goals in 27 appearances with Italy.
As for Balotelli, there was concern that Prandelli's code of ethics would prevent the striker from being called up, but the coach decided the ban wasn't a problem since it expires Sunday.
Forward Alessio Cerci, who tops the Serie A scoring chart with six goals for Torino, was also called up.
Italy plays Denmark in Copenhagen on Friday then hosts Armenia in Naples.
Italy leads Group B with 20 points, followed by Bulgaria (13), Denmark (12), Czech Republic (9), Armenia (9) and Malta (3).
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Goalkeepers: Gianluigi Buffon (Juventus), Federico Marchetti (Lazio), Salvatore Sirigu (Paris Saint-Germain).
Defenders: Ignazio Abate (AC Milan), Davide Astori (Cagliari), Federico Balzaretti (Roma), Leonardo Bonucci (Juventus), Giorgio Chiellini (Juventus), Lorenzo De Silvestri (Sampdoria), Manuel Pasqual (Fiorentina), Andrea Ranocchia (Inter Milan).
Midfielders: Alberto Aquilani (Fiorentina), Antonio Candreva (Lazio), Daniele De Rossi (Roma), Alessandro Diamanti (Bologna), Alessandro Florenzi (Roma), Emanuele Giaccherini (Sunderland), Claudio Marchisio (Juventus), Riccardo Montolivo (AC Milan), Thiago Motta (Paris Saint-Germain), Andrea Pirlo (Juventus), Andrea Poli (AC Milan), Marco Verratti (Paris Saint-Germain).
Forwards: Mario Balotelli (AC Milan), Alessio Cerci (Torino), Alberto Gilardino (Bologna), Lorenzo Insigne (Napoli), Pablo Osvaldo (Southampton), Giuseppe Rossi (Fiorentina).