Top Democrats have condemned Bush's decision as "disgraceful.
Bush has spared Libby, Vice President Cheney's former chief of staff, a 30-month jail term to which he was sentenced last month for lying to federal investigators about his role in the White House leak of a CIA officer's identity.
The President made his decision hours after a federal appeals court ruled that Libby was not entitled to remain free while he was appealing his conviction on four felonies.
"With the denial of bail being upheld and incarceration imminent, I believe it is now important to react to that decision," Bush said in a statement.
Bush said that he "respected" the jury's verdict but the prison sentence given to Libby was "excessive."
Libby, 56, still faces a USD250,000 fine that was also part of the sentence handed down last month by a district judge.
The decision of Bush came under fire from top Democrats with the Majority Leader Harry Reid saying that the President's decision is "disgraceful".
