An Israeli parole board ruled on Sunday that Katsav, 71, could walk free next week after serving five of his seven-year term.
Two previous parole requests had been rejected.
Katsav resigned from the largely ceremonial post in 2007 after being charged with rape and sexual harassment.
He has repeatedly professed his innocence.
Katsav's lawyer, Zion Amir, said his client burst into tears on hearing the news.
"It was a very long journey," he told Israeli army radio.
"Today that journey reached its end with a reasoned decision by the parole committee."
In November 2011, Israel's Supreme Court unanimously upheld Katsav's conviction for raping a former employee when he was a cabinet minister in the 1990s, and for sexually harassing two other women while president.
Katsav was born in Iran and became the first Israeli president to come from a Muslim country. He became a Likud party MP in 1977 at the age of 30.
Former Israeli President Moshe Katsav is to be freed on parole five years after being jailed for rape.