If the question is about your parents as individual people: Italians If the question is about your parents nationality: Italian ~ It’s all about the context ~

Both are technically correct but 2 is more natural. It sounds more authentic and it´s what a native speaker would say.

Both! In 1 "Italians" is a noun. In 2 "Italian" is an adjective. This is not true with all nationalities, but it does work in this circumstance and several others.