Jonathan Idema, Brent Bennett and Edward Caraballo were jailed last September after a chaotic trial that embarrassed US and Nato forces and sowed confusion about clandestine US operations in Afghanistan.
The three Americans were arrested in July when Afghan security forces raided a house in downtown Kabul and discovered eight Afghan men who said they had been abused. They were convicted two months later in a trial marred by faulty translation and seemingly improvised procedures.
Four Afghans were also convicted as accomplices. At a closed-door session on Tuesday, the appeals court upheld their convictions for torture and operating a private jail, one of four judges hearing the case Abdul Latif said on Thursday. But it quashed the charge that they entered the country illegally.
The court cut the 10-year terms handed to Idema, the alleged ringleader, and to right-hand man Bennett to five and three years, respectively, Latif said. Caraballo, a New York journalist, will serve two years instead of eight.
Latif said the trio had appealed to the Supreme Court, their last recourse.
Michael Macey, a spokesman for the US embassy confirmed the ruling, but provided no further details.
Idema, a 48-year-old former soldier from Fayetteville, North Carolina, insists he and his accomplices were tracking down "terror suspects" including al-Qaida leader Usama bin Ladin in close cooperation with US and Afghan security forces.
The US military acknowledges accepting a prisoner from Idema, but insists it realised shortly afterwards that Idema was an impostor.
Nato peacekeepers also helped the trio on three raids, later saying they were duped.
The three are being held at Kabul's Pul-e Charkhi prison, a facility notorious in Afghanistan for ghastly conditions and summary executions.
Officials have made the Americans' stay more comfortable, lodging them in a heated, carpeted room with satellite television and their own bathroom.