Zethraeus, 44, has served 19 years and two months of his life sentence. But the Stockholm District Court decided to cut the sentence to 33 years, making him eligible for early release.
The court noted that Zethraeus has participated in treatment programmes and maintained high marks in academic studies undertaken in prison following since 2006, when he was convicted for drugs crimes and conspiracy to commit assault while in prison.
While the court admitted some uncertainty remains about the chances of Zethraeus returning to a life of crime due to a shortage of evidence on which to make an assessment, the court ruled the uncertainty wasn't high enough to reject his request for a shorter sentence.
The ruling comes following Zethraeus's third appeal since 2008 to have his prison sentence reduced.
His previous applications were rejected on grounds that the possibility of recidivism remained high.
In his most recent appeal, he expressed "deep regret and shame" for his past transgressions, adding that he is "fully-aware" of the seriousness of crimes he has committed.
Married for a decade and with four children ages five to 20, Zethraeus said he has an "anchor in his life".
The Stureplan Murders (Stureplansmorden) took place at the Sturecompaniet restaurant in December 1994 in Stockholm's upscale Östermalm entertainment district.
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Zethraeus, who was 25 at the time, and two of his accomplices were denied entry into the establishment, at which point an altercation occurred. The group left the area to fetch a machine gun with the intention of scaring one of the bouncers.
They arrived back at Stureplan around 5am on the morning of December 4th, at which point Zethraeus opened fire, killing three patrons and one bouncer, and injuring 20 others in a hail of bullets.
Zethraeus and his accomplices fled the scene and a massive manhunt ensued. After three days on the run, he and one of the accomplices were arrested at a roadblock north of Stockholm.