In a large saucepan over medium heat, combine 1 1/3 cups water, soup and milk, and bring to boil. Add Italian seasoning, onion, garlic, barley, macaroni and rice. Reduce heat and simmer, uncovered, 15 minutes.
Meanwhile, in a non-stick skillet over medium heat, cook meatballs until no longer pink.
Stir carrot into soup, cover and simmer 5 minutes. Using a slotted spoon, transfer meatballs to soup. Stir in mushrooms and cheese and heat through.