Joseph Romano was one of 23 Americans tried and sentenced by Italian courts for kidnap over the CIA-led operation to abduct a cleric known as Abu Omar.
The Egyptian said he was flown to his home country and tortured there.
Mr Napolitano's office cited what it said were changes to US security policy undertaken by President Barack Obama.
It said Mr Obama had "immediately after his election, put an end to an approach to the challenges to national security... considered by Italy and the European Union not compatible with fundamental principles of rule of law".
It added that the Italian president "hoped to provide a solution to an affair considered by the United States to be without precedent because of the conviction of a US military officer of Nato for deeds committed on Italian soil".
The statement said the decision to pardon Col Romano was inspired by the same principle that Italy hoped to see used in the case of two Italian marines facing murder charges in India over the shooting of two fishermen.
Abu Omar was subject to the process known as extraordinary rendition, through which the CIA transferred terrorism suspects to countries that practised torture.
The policy was increasingly used in the wake of the 11 September, 2001 attacks in the US.
Italian courts convicted 22 CIA personnel over the Abu Omar case. All are believed to be living in the US and are unlikely to serve their sentences.
Col Romano was the only American convicted who was not a CIA employee.
At the time of the rendition, he was in charge of the northern Italian military air base at Aviano, where Abu Omar was flown before continuing to Egypt via Germany.
The Italian trials, which began in 2007, were the first to convict Americans over extraordinary rendition.
Last month, a court in Milan sentenced Italy's former intelligence chief Nicolo Pollari to 10 years in prison, and his former deputy, Marco Mancini, to nine years, over the Abu Omar case.
Both are expected to appeal.

The inaugural Nitro Athletics events take place in Melbourne next month, with six teams of 24 athletes taking part in non-traditional events such as middle-distance and hurdles relays.
Nine-time Olympic champion Bolt, 30, will captain an 'all-stars' team.
"We need brave, bold ideas that engage fans in events," said Coe.
"Athletics is a global sport with a global following, but we need events that bring back the fun, the kids and the crowds and... add a different dimension to the record-setting events like the world championships.
"Nitro Athletics is a great example of what can be done and what needs to be done to revolutionise how we present our sport and how our fans connect with the sport and the athletes."
Bolt and his team-mates will compete against squads from Australia, China, Japan, New Zealand and England - the latter captained by 2008 Olympic 400m champion Christine Ohuruogu.
The Nitro series will take place at Melbourne's Lakeside Stadium on 4, 9 and 11 February, and will build up to the World Championships in London in August, which is expected to be Bolt's final major competition.

United Utilities has been working at the Mancunian Way site over the weekend to assess the collapse.
A repair plan is "now in place" to stabilise the hole and make it watertight so engineers can repair the damage.
The road will remain closed in both directions while work takes place.
A spokesman for Manchester City Council said: "This initial phase of work could take up to 10 days, but until we are completely satisfied that the area is safe the section of the Mancunian Way will remain closed in both directions."
A diversion remains in place via London Road, Fairfield Street, A665, Hyde Road and Downing Street.
At the weekend, members of the public were warned not to cross a safety cordon as engineering work was being "hindered".
About two weeks' worth of rain fell in about six hours in Manchester on Friday before the hole appeared.
Tony Griffiths, of United Utilities, told the BBC: "An awful lot of rain fell on Friday - a few days' worth - which washed the ground material beneath the carriageway, causing the highway culvert to fail. Debris washed into the sewer, causing a domino effect leading to the collapse."
Mr Griffiths said the hole is still "quite unstable" and needs to be filled in before work can be carried out.
Italian President Giorgio Napolitano has pardoned a US Air Force colonel convicted in absentia over the rendition of an Egyptian imam in 2003.
[NEXT_CONCEPT]
A new athletics team event, headlined by Usain Bolt, could "revolutionise" the sport, according to World Athletics chief Lord Sebastian Coe.
[NEXT_CONCEPT]
A busy Manchester road which partly collapsed when a sinkhole appeared is to remain closed for at least 10 days.