Some 10,105 prisoners are "potentially eligible" for alternative measures to prison, such as house arrest or probation, the ministry said in a statement late on Tuesday.
The option would apply to people whose convictions are final and no longer subject to appeal, less than 2 years of sentences left to serve, and no serious disciplinary offences in the past 12 months.
People serving time for serious crimes such as terrorism, organized crime, rape, migrant trafficking and kidnapping would be excluded, the ministry added.
According to the World Prison Brief database, Italy has one of Europe's worst prison overcrowding records, with an occupancy level of around 122%.
Any level above 100% indicates that prisons are occupied above their maximum capacity. Only Cyprus, France and Turkey have higher scores in Europe, according to the database.
The plight of prisoners has attracted attention in Italy following a rise in suicides and complaints about soaring summer temperatures in detention facilities that are not air- conditioned.
However, the early release of prisoners is a politically sensitive move, and the Justice Ministry indicated that it would not happen overnight.
It said it had set up a taskforce to liaise with prisons and parole judges to facilitate decisions on individual cases, which will meet weekly and report on its work by September.
(Reporting by Alvise ArmelliniEditing by Frances Kerry)

epa08280707 Inmates gather on the roof of the prison during a prison riot in Foggia, Apulia region, southern Italy, 09 March 2020. Several inmates in Foggia have reportedly managed to evade after tearing up a gate at the prison's block house and once they reached the road outside where blocked by the police, media reported. Violent protests broke out on the day in 27 Italian prisons against the novel coronavirus restrictions affecting the country with many inmates asking for an amnesty due to the virus emergency. Serious riots are taking place at San Vittore in Milan and Rebibbia in Rome where, as well as burning mattresses, some inmates attacked the infirmaries, media reported. EPA-EFE/FRANCO CAUTILLO