The diagnosis was made by Luigi Cancrini during an interview with Radio 24.
He said Berlusconi, who in July was convicted of tax fraud by the supreme court - his first definitive criminal conviction, has "narcissistic personality disorder".
"When some people find themselves in a position of great importance, narcissism gets worse ," he added.
"They are surrounded by people who have an interest to flatter, and so they do not see the reality."
But there is hope for the 77-year-old three-time former prime minister, Cancrini continued.
"He could be healed with a year-and-a-half of therapy...But it would need to be strict: he would need to attend weekly sessions, and have a lot of patience."
Berlusconi faces being forced out of parliament for the first time in a 20-year-long political career but he is expected to continue wielding influence even from outside parliament, although far less than before.
On Monday, he pleaded with fellow senators to delay their vote for the sake of the country, claiming he had new evidence which warranted a judicial review of the tax fraud case for which he is being expelled.
His supporters are organising a rally outside his Rome residence on Wednesday at which thousands are expected, while anti-Berlusconi activists are planning a smaller protest near the Senate.