The judges said no other solution will improve conditions so poor that inmates die regularly of suicides or lack of proper care.
The panel said it wanted the state to present a plan to trim the population in two to three years.
"There are simply too many prisoners for the existing capacity," they wrote. "Evidence offered at trial was overwhelmingly to the effect that overcrowding is the primary cause of the unconstitutional conditions that have been found to exist in the California prisons."
The state can change parole and other policies to cut the population of its 33 adult prisons without endangering the public, the judges said.
Reducing the number of inmates might have a positive effect as well, they said. "This is particularly true considering that California's overcrowded prison system is itself ... a public safety hazard," the San Francisco-based panel said in its order.
The three federal judges said a final population figure would be set later and they may hold more hearings before making their decision final.
After hearing closing arguments in the case last week, the judges said they wanted to quickly issue a tentative ruling in hopes of forcing the state to take steps on its own or reach a settlement with attorneys representing inmates.
In Monday's order, they offered the services of a court-appointed referee for settlement talks. Previous negotiations failed, forcing the trial that started in November.
