Spokesman, Zadig Abraha, insisted the country had no political prisoners and that "some members of political parties and other individuals that have been allegedly suspected of committing crimes and those convicted will be pardoned or their cases interrupted, based on an assessment that will be made".
The Horn of Africa country has been wracked by violence for nearly three years, with protests first breaking out in its Oromiya province over allegations of land grabs.
Some of the prominent politicians now in custody include opposition leaders Bekele Gerba and Merara Gudina, and several journalists also remain in detention.
The government of Ethiopia - Africa's second most populous country and an important United States ally in the fight against terrorism - has never acknowledged that it holds political prisoners, which would violate the country's Constitution.
Rights group Amnesty International said the decision could signal the "end of an era of bloody repression".
An independent task force has also been set up to investigate human rights abuses and the handling of prisoners.
The announcement followed soon after the 17-day-long meeting of the executive committee of the ruling party, which was triggered by the country's recent condition.
Ethiopia faced in 2016 unrest that killed hundreds, dubbed by analysts the gravest challenge to the ruling coalition Ethiopian Peoples Revolutionary Democratic Front in 25 years.
Opposition supporters and activists accuse the Ethiopian government of using the detention center to coerce confessions from suspects usually charged under an anti-terror law. The demonstrations began in 2015, initially to protest government development plans near the capital, Addis Ababa.
Hailemariam said a detention facility known as "Makelawi", where rights groups have alleged that torture has taken place, would also be closed down and turned into a museum.