Chelsea Manning will be freed in five months after US President Barack Obama reduced her remaining prison sentence for leaking classified government documents to WikiLeaks.
Manning was convicted of leaking a huge cache of American military and diplomatic papers and was sentenced to 35 years in 2013.
Mr Obama has said she will be freed on May 17, 2017, instead of her scheduled release in 2045.
The White House has denied claims her release has been influenced by WikiLeaks or its owner Julian Assange.
On Monday, WikiLeaks appealed to Barack Obama to release Manning, so she could "expose war crimes and corruption under Trump".
Mr Obama also shortened the sentences of 208 other prisoners and pardoned 64 individuals on Tuesday, in one of his last acts as president.
Manning's family has told ITV News the commutation is "absolutely amazing" news.
Manning was born male in the US. Her mother is Welsh and she spent part of her teenage years in Pembrokeshire.
Pembrokeshire MP Stephen Crabb said it was an "act of mercy and compassion in the closing days of the Obama presidency".
Manning was known as Bradley Manning when she was deployed to Iraq in late 2009 as a low-level intelligence analyst.
She copied 250,000 diplomatic cables from American embassies around the world and hundreds of thousands of military incident logs from the Afghanistan and Iraq wars.
The classified information was disclosed by Wikileaks, who provided news organisations with the documents.
After being convicted of espionage, Manning revealed that she identifies as a woman and had changed her name to Chelsea.