The treatment should focus on the factors leading to the crime that he committed, an official statement said.
The convicted South African athlete shot dead his girlfriend Reeva Steenkamp at his home in 2013, saying he mistook her for a burglar.
Oscar Pistorius, now 28, was convicted of culpable homicide, or manslaughter, in 2014.
The double amputee had hoped to be released in August after a parole board ruled that he could serve the rest of his five-year prison sentence under house arrest.
However, South Africa’s Justice Minister Michael Masutha prevented the release, saying the decision had been taken prematurely.
At the time of his intervention, Oscar Pistorius had been granted parole only six months into his five-year sentence.
Michael Masutha argued that the law states that an offender can only be considered for parole after serving one-sixth of his sentence, in this case 10 months.
On October 5, a panel, led by Judge Lucy Mailula, ruled that Michael Masutha had acted correctly.
It said the parole board should again consider Ocar Pistorius’ request to be placed under house arrest, or correctional supervision.
The panel ruled that psychotherapy should be given “even if the offender is, indeed placed under correctional supervision”, the prisons department said in a statement.
Oscar Pistorius should “be subjected to psychotherapy in order to address criminogenic factors of the crime he committed,” it said.
It also ruled that the parole board should consider imposing conditions restricting the use of firearms by the offender, the statement added.
Reeva Steenkamp was killed after he fired multiple shots though a locked door on Valentine’s Day 2013.
High Court Judge Thokozile Masipa acquitted Oscar Pistorius of murder in 2014, saying there was insufficient proof to convict him.
The prosecution has appealed against the acquittal and the case will be heard next month by some of South Africa’s most senior judges.
Oscar Pistorius, who was born without the fibulas in both of his legs, and had surgery to amputate both below the knee while still a baby, went on to become one of South Africa’s best-known sports stars, and was the first amputee to compete against able-bodied athletes at the 2012 London Olympics.
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