Before the European Championships, Hodgson joined Italian Serie A giants Internazionale, where he worked from 1995 to 1997. With significant investment, he presided over a rebuilding phase. Inter had finished 13th and 6th in the seasons prior to his arrival. After a terrible start to the season, Hodgson was brought in and guided the club to 7th place in the 1995–96 season, qualifying for the UEFA Cup. The 1996–97 season saw Hodgson leave Inter after 14 wins, 13 draws and five defeats in Serie A, with Inter placed 3rd in the league, and he was replaced by Luigi Simoni whose side finished 2nd in the league in the 1997-8 season and won the UEFA Cup. Hodgson says of his time at Inter: "We lacked stars, apart from Paul Ince. It wasn't the Inter we see today of household names. They weren't the best technically but physically they were like machines. The Premier League is like that now, but back then Italy was far ahead."[6]
Hodgson managed to get his Inter team, containing Javier Zanetti, Youri Djorkaeff and Paul Ince, through to the 1997 UEFA cup final where they would play Schalke 04. Given that Inter had a recent history of winning UEFA cup finals, with victories in both 1990 and 1994, the Italian side started as favorites. When the German underdogs won the final in Milan, Inter fans pelted Hodgson with coins and lighters.[10]
Hodgson later admitted that, throughout his one-and-a-half seasons at Inter, there had been regular speculation that he would get the sack, but he insisted he had had the support of the owners.[11]