"In the face of an exceptional human situation, the president wanted to make it possible for (Jacqueline) Sauvage to return to her family as soon as possible," the presidency said in a statement.
The rare pardon granted by Hollande amounts to a reduction of Sauvage's sentence that will allow the 68-year-old to leave prison in mid-April, her lawyers told AFP. By then, she will have spent more than three years behind bars.
The gesture came just two days after the president met for the first time with Sauvage's three daughters and her lawyers on Friday.
Sauvage's case had become a cause celebre in France, with more than 400,000 people signing a petition demanding her release.
"I'm overwhelmed, happy, grateful, relieved," said Eva Darlan, founder of an advocacy group for Sauvage.
Sauvage was married for 47 years to Norbert Marot, a violent alcoholic who she said raped and beat her and her three daughters and also abused her son.
On September 10, 2012, the day after her son hanged himself, Sauvage shot her husband three times in the back with a rifle.
She was found guilty of murder and sentenced to 10 years in prison in October 2014, which was upheld on appeal in December 2015 as the state rejected her plea of self-defence.
The group Osez le Feminisme (Dare To Be Feminist) called for the definition of self-defence to be expanded in cases of "female victims of violence".
Sauvage's case has cast a spotlight on the tricky and controversial legal argument known as "battered woman syndrome".
Her lawyer Nathalie Tomasini had appealed to the court to "push the limits of self-defence applied to situations of marital violence."
(The family of Jacqueline Sauvage arrive at the Elysée. Photo: AFP Video)
One previous pardon
In French law for an act to be considered self-defence it must be seen as proportional and in direct response to an act of aggression.
Killing in response to repeated acts of violence suffered over decades, as in Sauvage's case, did not meet this test.
She was faulted for her passivity faced with the violence and incest carried out by her husband.
"We were afraid of him, he terrified us," one of her daughters told the court.
Another of her daughters, raped at the age of 16, described her father's death as a "relief".
When campaigning for the presidency in 2012, Hollande distanced himself from presidential pardons, describing them as belonging to "a different concept of power".
He has used the power only once, when he freed convicted bank robber Philippe El Shennawy -- who had spent 38 years behind bars -- in 2014.