Ms Gao, who is 71, was found guilty last April and appealed her conviction at a closed hearing in Beijing.
Foreign governments and human rights groups have condemned the verdict calling it politically motivated.
"We of course hoped our defence would have set her free, but the reduction of two years is still a good thing," her lawyer Shang Baojun told AP news agency.
The well-known investigative journalist was found guilty of sending an internal Communist Party document to Mingjing News, a Chinese-language website in the United States. The document warned against the dangers of a free press and an independent civil society.
At the time of the original conviction the court had said that Ms Gao had "illegally provided state secrets to foreigners".
Both Ms Gao and Mingjing News have denied she was the source of the leak.
`Might not survive`
The BBC`s Celia Hatton in Beijing says no reason was given by the court to explain the unusual reduction in her sentence. Many people have pressed for a lighter sentence in consideration of Ms Gao`s advanced age and her chronic heart problems.
Ms Gao`s son, Zhao Meng, told the BBC he was concerned his mother would not survive another lengthy period in prison, her third since 1989.
Hey lawyers said medical parole could be an option for Ms Gao, according to the AP.
Our correspondent says many believe that Gao Yu is unpopular with the Chinese government because of her unrelenting reports focusing on China`s elite-level politics.
News of Ms Gao`s upheld conviction attracted further criticism.
Prominent human rights activist Hu Jia tweeted in Mandarin: "Changing seven years to five years has no meaning, for innocent citizen Gao Yu to be detained for five minutes is already a violation of rights."
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