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The Moscow mayoral candidate was found guilty of heading a company that embezzled $500,000 worth of lumber from the KirovLes state timber firm.
Navalny was acting as advisor to the governor of Kirov during the time.
The opposition leader claimed the charges were politically motivated.
He has been a strident critic of Russian President Vladimir Putin and will now be barred from running for public office unless he files an appeal.
Navalny’s supporters will hold a demonstration in downtown Moscow on Thursday evening.
Prosecutors earlier this month requested that Navalny get six years in prison and a fine of one million rubles ($30,000).
The co-defendant in the trial, Pyotr Ofitserov, ran the Vyatka Timber Company and was accused of willingly buying the timber at below-market prices.
Ofitserov has also been found guilty and will serve a four-year prison sentence.