In a lightning hearing that was abruptly brought forward by two weeks, a judge found both Navalny and his brother Oleg guilty of embezzlement and sentenced the siblings to three and a half years in what is widely seen as a politically motivated case.
But while Navalny's sentence was suspended, his younger brother, who is not involved in politics, was ordered to serve the time behind bars in what observers saw as an attempt to muzzle the Kremlin's critic ahead of 2018 presidential elections by taking his brother hostage.
"This regime does not just destroy its political opponents... Now they target, torture and torment the relatives of its political opponents," Navalny said angrily outside the courthouse, calling the verdict "the most mean and disgusting" possible.
"This regime has no right to exist, it must be destroyed," he said. "I call on everyone to take to the streets today."
Navalny's supporters had already been planning to gather later on Tuesday near the Kremlin and by midday, 17,000 people have pledged on Facebook to attend the 1600 GMT rally.
The protest has not received required authorisation from city hall and police warned that all illegal activity would be punished.
The charismatic Navalny has become a major thorn in the Kremlin's side over the last several years, first building a massive support base on the Internet as an anti-corruption blogger, then rallying tens of thousands during the 2011-12 anti-Putin protests and most recently coming in second in last year's Moscow mayor's race after a grassroots campaign against the Kremlin-backed candidate.
The Navalny brothers were accused of defrauding French cosmetics company Yves Rocher of nearly 27 million rubles (more than half a million dollars at the exchange rate at the time), although the firm has said that it suffered no damages.
Prosecutors had asked the court to jail Alexei for 10 years and Oleg for eight.
Today's hearing was a rushed affair -- first the court abruptly moved it forward two weeks to just before the New Year -- Russia's biggest holiday -- in a move seen as a tactic to avoid massive protests.
And the reading itself took only about 15 minutes -- unusually for Russia where judges usually read sentences for hours, outlining the prosecution's proof and witness testimonies.
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