Edoardo D'Avossa, a Milan judge, on Monday decided not to press charges of embezzlement before July 1999 as well as charges of fraud and false accounting before 1998 for Berlusconi in the case, the sources said.
For Mills, charges of receiving stolen goods up to 1993 have been shelved.
However, the charges stemming from suspected criminal conduct after those dates remain in place, the court sources said. The case has been adjourned until January 26.
Mills told Reuters: "While I have a complete defence on the merit of all these charges, I'm not going to kick a gifthorse in the teeth when some are thrown out for procedural reasons." He declined further comment.
A related case in which magistrates have accused Berlusconi of having paid Mills a $600,000 kickback in 2000 for withholding incriminating details of Berlusconi's media empire in testimony in 1997 is due to start hearings in March.
Berlusconi, Italy's richest man, is charged with fraud at Mediaset, which his family controls, along with 13 other people including Mills, the estranged husband of Tessa Jowell, the British culture secretary.
Prosecutors have said a US firm sold TV rights to two offshore companies controlled by Berlusconi, which in turn sold the rights to Mediaset at an inflated price to avoid Italian taxes and create a slush fund.
Berlusconi and Mills have denied wrongdoing.
Berlusconi still face charges of fraud and false accounting relating to the whole of 1999 and for embezzlement after July 1999. Mills still faces charges of handling stolen goods from August 9, 2003 to July 2004 and for fraud for 1999 and 2000.