"Azerbaijan's Supreme Court threw out Ismayilova's initial seven-and-a-half-year sentence and handed her a three-and-a- half-year suspended sentence," the lawyer, Fariz Namazly, told AFP.
"We expect her to leave the prison later in the evening," he said.
Ismayilova, an award-winning journalist and anti-graft crusader was imprisoned in September 2015 for seven and a half years for economic crimes.
She and her supporters have denounced the charges as politically motivated.
Considered Azerbaijan's most prominent opposition journalist, Ismayilova served as bureau chief for the local service of the US-funded Radio Free Europe/Radio Liberty network between 2008 and 2010.
International rights groups and Western governments have condemned Ismayilova's imprisonment and urged the authorities to release her.
Amnesty International called her a "prisoner of conscience."
US-based NGO Freedom House says there are now more than 80 political prisoners in Azerbaijan.
Aliyev strongly denies accusations of rights abuses.
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