The 70-year-old, who was prime minister from 2006 to 2009, was sentenced in May 2014 to six years in prison on two separate charges of taking bribes.
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The Supreme Court on Tuesday reduced his sentence to 18 months in prison, and acquitted him on one of the charges, according to a decision seen by AFP.
"Olmert has been acquitted of the felony of taking a bribe of 500,000 shekels ($128,500/117,000 euros)," the decision read, but "unanimously convicted of the felony of taking a bribe of 60,000 shekels".
"The sentencing will be for 18 months" beginning on February 15, said the decision reached by five justices.
The trial of the former premier and 15 other defendants, which lasted more than two years, was linked to the construction of Jerusalem's massive Holyland residential complex when Olmert served as the city's mayor.
In 2010, he was named the key suspect in what became known as the Holyland affair, accused of receiving hundreds of thousands of shekels for helping developers get the project past various legal and planning obstacles.
The towering construction project, which dominates the city's skyline, is seen as a major blot on the landscape and widely reviled as a symbol of high-level corruption.
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The 500,000 shekel bribe was linked to the Holyland affair, while the 60,000 bribe was not.
"A heavy weight was lifted from my chest today, when the Supreme Court exonerated me of the main charge, of Holyland," a tired-looking Olmert told reporters outside the courtroom.
"I was never offered bribes, nor did I ever take any," he said.
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