The decision, announced Wednesday in the southern state where Gandhi was killed, would free four people serving life terms and three whose death sentences were changed to life imprisonment the previous day by India's Supreme Court.
The announcement, made by Chief Minister Jayalalitha Jayaram, came months before India's much-awaited general elections in which Jayalalitha is seen by some analysts as a likely aspirant for the prime ministerial post. About a dozen political parties will be in the election fray.
Rahul, the couple's son, is also seen by some experts as a candidate for the top job in the world's largest democracy. The Gandhi family is not related to Mohandas Gandhi, acclaimed as the father of India's freedom movement.
The Hindustan Times said the Tamil Nadu government will send its decision to New Delhi. If the federal government does not respond in three days, the state will use its own powers to release the prisoners.
"Taking into account that they have spent nearly 23 years in prison, the state Cabinet has resolved to release them, exercising the power of remission ....," Jayalalitha told the state Assembly, the Indian Express reported.
The prisoners are Santhan, Murugan, Perarivalan, Nalini, Robert Pious, Jayakumar and Ravichandran. The first three had been on death row since 1998 before their sentences were commuted Tuesday.
The death sentence of Nalini, a woman, had earlier been commuted on humanitarian grounds on the recommendation of Sonia Gandhi. Murugan is Nalini's husband.
All seven had belonged to the Tamil Tiger separatist group in neighboring Sri Lanka, where a 25-year-long civil war was crushed by the military in 2009.
Rajiv Gandhi was killed in May 1991 by a female suicide bomber at a rally in Tamil Nadu as he campaigned for re-election. Authorities said the attacker set off the explosives while garlanding him and also killed seven other people.
The Financial Times said Gandhi may have been killed in retaliation for sending a peacekeeping force to Sri Lanka in 1987.