The Nice forward was heavily criticised for his performance in his first competitive game for Italy since the 2014 World Cup, a 1-1 draw against Poland on Friday.
Balotelli limped off after an hour before Chelsea midfielder Jorginho rescued a point for the Azzurri in Bologna.
And the 28-year-old forward did not take part in a full training session on Saturday after undergoing tests.
Mancini confirmed he was struggling for fitness, with the forward applying an ice pack to his thigh after being substituted on Friday.
“His fitness levels are an issue right now,” Mancini told Rai Sport.
Balotelli has been short of match time as a result of a contract dispute with Ligue 1 club Nice after a planned move to Marseille failed to materialise.
“I will have to talk to him a lot and he must improve a lot,” said Mancini.
“Mario has to find form.
“I’m just disappointed because we didn’t win, not disappointed in any player.”
Mancini, Balotelli’s former manager at Inter Milan and Manchester City, recalled the striker after taking over as national coach last May.
Balotelli played in three friendlies in June, scoring on his debut in a 2-1 friendly win over Saudi Arabia.
Mancini said he would make some changes for the trip to Portugal as he continues to rebuild Italy after their World Cup qualifying fiasco.
“We need to get a better result than this,” added Mancini.
“We could well change the system too, just like a few players.”
Meanwhile, Alessandro Costacurta, the Italian Football Federation vice-commissioner praised what Mancini was achieving.
“Since Roberto arrived, there has been growing enthusiasm and he brought a great breath of fresh air after a difficult period.
“As Mancini said yesterday (Friday), everyone must have more courage to perhaps give Balotelli better service and then he can deliver the goals.”
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