The prisoners will be placed under house arrest or in therapeutic centres, but will not be freed, said Cancellieri. There will also be a reduction in pre-trial detention and alternatives to prison time for those who have committed minor offences.
The move comes in response to pressure from the European Court of Human Rights to address the problem of prison overcrowding by May 2014.
The bill also mandates that those who have reoffended, but for minor crimes, will be given alternatives to jail time, while severely ill people and mothers with sentences of under four years will be able to serve their time under house arrest.
Cancellieri told La Stampa she didn't understand what earlier reports that 'mobsters would be free to walk the streets' were founded upon. "It is not a measure of 'empty jails' in the classic sense. It is not for the benefit of those who have committed serious crimes," she said.
Cancellieri is hoping for an eventual prison amnesty.
Currently in Italy, there are only 45,000 prison places for a total of 66,000 detainees.
According to European law, each prisoner must have at least three square metres in his or her cell. Any space smaller than this is considered torture.