The head of the crimes division unit at the Supreme Court told reporters on Tuesday Abu Bakr Bashir's sentence had been slashed from three years to 18 months.
Judge Moegihardjo also confirmed time spent in prison was going to be taken into consideration in deciding his release date.
Based on time served, that could mean Bashir will be free within weeks as he was first detained in 2002.
In response to a previous appeal, a lower court had already cut the cleric's term from an original four years and cleared him of treason.
Moegihardjo gave no reason for the new cut in sentence, but the decision comes ahead of parliamentary and presidential elections in the world's most populous Muslim nation.
The move is likely to please conservative voters who have accused the West of forcing Jakarta to get tough with Islamist activists.