The Lord Chief Justice, Lord Judge, sitting at the Court of Appeal in London with two other judges, replaced 53-year-old Munir Hussain's 30-month prison term with one of two years, and ordered that it should be suspended.
Hussain, of High Wycombe, Buckinghamshire, is expected to be released later today from Bullingdon Prison in Oxfordshire.
His brother Tokeer, 35, had his 39-month jail term reduced to two years. It is understood he could be released in about five months.
The pair, described as family men at the heart of the local community, were jailed in December after being found guilty at Reading Crown Court of causing grievous bodily harm with intent to Walid Salem.
He suffered a permanent brain injury after being chased down the street by a group of men and struck with a cricket bat so hard that it broke into three pieces.
Lord Judge, sitting with Mrs Justice Swift and Mr Justice Sweeney, described Munir Hussain's case as one of "true exceptionality" and announced: "The plain, simple reality is that Munir Hussain was acting under the continuing influence of extreme provocation.
"Involvement in this serious violence can only be understood as a response to the dreadful and terrifying ordeal and the emotional anguish which he had undergone."
His family had effectively been kidnapped in their own home: "He feared for their lives and the honour of his wife and daughter."
After the ruling Munir Hussain's son, Awais, 22, said he was "extremely grateful" to the court for releasing his father, describing the decision as a "big relief".
Talking about the attack on his family in September 2008, he said: "It was quite terrifying. I don't think our family will get over it. It is going to stay with us for the rest of our lives."
He added: "They said they were going to kill us. As far as we knew they were going to kill us immediately."
The family's legal spokesman, Razi Shah, said Munir Hussain had not recovered from his ordeal and every day relived the terror of being imprisoned in his own house.
He also lived with the fear that his family could still be in danger while he remained in prison.
Hussain and his wife and children had returned from their local mosque during Ramadan to find intruders wearing balaclavas in their home.
He feared for their lives as their hands were tied behind their backs and they were forced to crawl from room to room.
The businessman made his escape after throwing a coffee table.
Lord Judge said: "This trial had nothing to do with the right of the householder to defend themselves or their families or their homes.
"The burglary was over and the burglars had gone. No one was in any further danger from them."
There was no dispute that Salem, 56, "a professional criminal" who was living in Borehamwood, "was subjected to a very serious attack".
He was on the ground and "completely defenceless". His injuries included a fractured skull, jaw and ribs.
Such violence was not lawful, said the judge, and in the overwhelming majority of cases where public violence by a gang produces such serious injury "very long" prison sentences were required.
But Lord Judge said this was "not an ordinary or normal case or one that falls within the overwhelming majority of cases, not least because of the character of the two appellants".
He said: "It is rare to see men of the quality of the two appellants in court for offences of serious violence."
The "call for mercy" on their behalf had been intense and the court had concluded that it "must be answered" to the extent of reducing both sentences to two years - but suspending that of Munir Hussain.
A sentence of two years was in itself "merciful", but Lord Judge added: "We have come to the conclusion that we have ample justification for ordering that it should be suspended."
Reducing Tokeer's sentence, but not suspending it, he said : "He himself was not the victim of any crime. He will not have to live with the consequences of the crime."
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