With the decree, announced last night by the presidential palace, President Sergio Mattarella reduced Robert Seldon Lady's sentence to seven years from nine.
Mattarella also wiped out the entire penalty - three years - faced by another American convicted in the case, Betnie Medero. The palace statement noted that "neither of the two is currently in Italy."
They are among 26 Americans convicted in absentia in the kidnapping of a Muslim cleric, Osama Moustafa Hassan Nasr, also known as Abu Omar, from a Milan street.
But Gauri van Gulik of Amnesty International called the move "an affront to justice" in a statement today, adding that "the right thing to do would be to insist on extraditing them to Italy."
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Italian prosecutors' requests for extradition failed to move the Italian Justice Ministry into taking action.
Extraordinary renditions were part of the anti-terror strategy under the Bush administration after the September 11, 2001, attacks.
Giorgio Napolitano said he pardoned Joseph Romano in hopes of resolving a situation "considered by the US to be without precedent, because of the aspect of convicting a US military officer of NATO for deeds committed on Italian soil."
Romano was security chief at Italy's Aviano air base where the cleric was taken before being flown out of the country and eventually to Egypt.
In 2013, Seldon Lady, the former CIA chief in Milan, was detained in Panama after Italy requested his arrest. But a few days later, Panama let Seldon Lady, who is retired, return to the US. He then asked for a pardon from the Italian president.
Among those seeking pardon is Sabrina de Sousa, an ex-CIA operative arrested in October in Portugal. She was sentenced to six years for her role in the kidnapping of the terror suspect who was under surveillance by Italian law enforcement.
She was traveling to visit her mother in India when she was detained. She was released after surrendering her US and Portuguese passports.