The decree will not include violent offenders serving long terms, and it will assist in prison overcrowding, Italy's ANSA news agency reported.
The announcement comes at a tenuous time for Italy's justice officials, after serial killer Bartolomeo Gagliano fled Tuesday while he was on good behavior leave from prison.
Gagliano, 55, was captured on Friday in France after a massive manhunt.
He has an extensive criminal record and has been serving time in prison for killing two prostitutes and a transsexual in the 1980s.
Italian Justice Minister Anna Maria Cancellieri called for a full investigation into why Gagliano was allowed to leave prison. She also urged the public to not judge the entire system on this one incident.
Authorities also arrested a second fugitive, Pietro Esposito, who also failed to return to prison while on good behavior leave.
The 47-year-old mafia member is serving time for participating in the killing of a young woman.
Justice Minister Anna Maria Cancellieri admitted that the incidents have affected the system's credibility.
"There is no denying that this risks being a hard blow for what we are doing to make prisons a more civil place that is able to fulfill its rehabilitative function," she said.