He said individual pardons would be closely studied, but "convicts will be excluded who have been sentenced for especially grave crimes, such as crimes against humanity, terrorism, drug trafficking, homicide, violent crime, rape and abuses against minors".
Chile's Catholic Church had asked Pinera to free or lower jail sentences of military officers convicted for human rights violations as well as other criminals last week in a call for clemency to mark the country's upcoming bicentennial celebrations.
However, the pardon request infuriated human rights groups and the centre-left opposition, which ruled for 20 years after General Augusto Pinochet left power in 1990, rekindling memories of his 1973-1990 rule that still divides many Chileans.
Mireya Garcia, the vice-president of the Group of Relatives of the Detainees and Disappeared, said those who commit crimes should serve their sentences.
"Justice doesn't have to do with clemency but with what is fair"
vice-president of the Group of Relatives of
the Detainees and Disappeared
"Justice doesn't have to do with clemency but with what is fair," Garcia said.
The church's proposed amnesty would have applied to prisoners who are sick, older than 70 or those who have served half their sentence.
Rights advocates welcomed Pinera's decision was positive, but relatives of the kidnapped and jailed said they will remain alert for any future pardons.
Chile's past government said 3,195 people were killed or "disappeared" during Pinochet's rule and around 28,000 people, including former President Michelle Bachelet, were tortured.
About 600 military personnel have been accused of crimes against humanity but no more than 150 are now in prison.
Pinochet, a controversial figure who is still admired by some but hated by many, died in 2006 without ever being convicted on charges of human right abuses.