It took place between 14 and 19 March 1995 in Portugal with Sweden winning the event defeating Denmark, 1-0, in the final game.

[1] The number of invited countries was increased from six to eight with Italy and the Netherlands appearing in their first Algarve Cup tournament.

Hosts Portugal again appeared in the play-off for last place, facing newcomers Italy and being defeated 4–1 with two of the Italians' goals being scored in the final two minutes of play.

With the score at 3–3 after full-time, a period of sudden death extra-time was played that failed to see another goal.

Sweden had played Denmark in the previous year's competition to decide third place and defeated them again on this occasion to finish as overall winners of the tournament.