The .22 calibre pistol, which resembles something that James Bond would use, was seized by Italian police during an early morning blitz.
Besides the mobile phone gun, officers also found two traditional handguns, bullet proof vests, drugs, ammunition and 8500 euros (£7,242)
The operation against the Camorra, the version of the Mafia in the crime-ridden southern port city of Naples, took place in the Torre Annunziata suburb.
The mobile phone pistol was capable of holding four bullets and was fully-loaded and ready to be used. The antenna works as the barrel of the pistol.By sliding the key part, the phone turned into a gun and could be fired using one of the buttons on the pad.
The phones first emerged in Eastern Europe in 2000 and their use by the Mafia is seen as a worrying development.
Officers from the paramilitary Carabinieri police were involved in the raid against the Gionta clan crime family who control the area.
A police spokesman in Naples said: "Tests are being carried out on (the gun) to see if it has been used recently and involved in any shootings."
A 28-year-old man, identified as Luigi Gaito, was arrested by police during the operation but several others escaped. He is facing charges of receiving stolen goods, drugs trafficking and illegal possession of firearms.
Earlier this month, 47 people including the wife of jailed Godfather Valentino Gionta - the leader of the crime family syndicate - were arrested. Police say the Gionta clan is involved in murder, extortion and drug trafficking.
Investigators believe that Gemma Donnarumma allegedly ran the clan after her husband was convicted and sentenced to life for murder.
As part of the raid bank accounts and assets worth about 80 million euros (£68m) were also seized.
Thanks to Nick Pisa
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