The move was announced as part of the President's Easter message and could save around 1,200 convicts.
However, Gloria Arroyo, did not say whether she would move to abolish the death penalty, which has not been carried out since 2000.
Anti-crime groups have criticised the decision, describing it as insensitive.
Teresita Ang-See of the Anti-Crime Movement for the Restoration of Peace and Order told Philippine television that crime victims were "dismayed and shocked" by the announcement.
"It’s the height of insensitivity and callousness," she said.
"Regarding those who face the death penalty, I announce that we are changing that punishment and will make (the maximum penalty) life imprisonment," Arroyo said in the message.
Groups providing legal aid to poor prisoners said death row inmates were overjoyed at the news.
"They're really very, very happy. They're ecstatic," said Maria Socorro Diokno, of the Free Legal Assistance Group.
Diokno called on the Philippine president to clarify whether the decison applied to all prisoners.
Arroyo did not say why she had made the decision now. She imposed a moratorium on death sentences in 2001 but reintroduced it in 2003, after a series of violent crimes.
The Philippine president has faced allegations of corruption, and reports say the move could be an attempt to win favour with the country's influential Catholic bishops – who have long-called for the abolition of the death penalty.