The judge in the court in the provincial city of Kirov found the Kremlin critic and anti-corruption whistleblower guilty on a charge that the 40-year-old lawyer insists is aimed at knocking him out of the vote.
Navalny in December announced his intention to run for president in 2018, while Putin has yet to confirm his expected participation.
The fierce Kremlin critic insisted he would keep on campaigning despite Russian law banning people serving such a sentence from standing for office.
"I will continue to represent the interests of people who want to see Russia a normal, honest and non-corrupt country."
The court held a retrial case after the European Court of Human Rights last year quashed an original 2013 against Navalny ruling, saying that the politician and his co-defendant, businessman Pyotr Ofitserov, did not have a fair trial.
They had been convicted of alleged embezzlement from the Kirov regional government budget of 16 million rubles (USD 270,000, 253,000 euros) in a timber deal when he was working as a consultant to the governor.
"It's 100 percent the same," Navalny told journalists in court.
The judge however took into account the years that the men served from their suspended sentence before the ECHR verdict last year.
This means Navalny's suspended sentence will run out in about 18 months, his lawyer Olga Mikhailova told journalists.
Navalny vowed to appeal and continue his bid for the presidency regardless.
"There's no question that we will appeal," he said.
"We don't recognise this verdict, this verdict will be annulled," he told journalists in court.
After Navalny appealed to the European court, Russia's supreme court ordered that Navalny and Ofitserov face a retrial.
However, in a legal confusion, the Russian constitution allows anyone who is not in prison to stand for election.
Putin's spokesman Dmitry Peskov ahead of the verdict denied that Navalny's possible exclusion would make the 2018 polls look bad to international observers.
"As for how it will look, here we don't consider any fears to be appropriate," Peskov said.
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