Judge Sergei Blinov said the anti-corruption campaigner had defrauded a timber firm. Navalny has always insisted the trial was politically motivated, due to his opposition to President Vladimir Putin.
The 37-year-old had been a leading campaigner against Mr Putin's United Russia party, and regularly blogged about allegations of corruption.
His supporters in Moscow have vowed to stage protests against the verdict later on Thursday.
Navalny arrived at the courtroom in Kirov to hear the verdict, after a 12-hour overnight train journey from Moscow.
The prosecution had asked for a six year jail sentence, but judge Sergei Blinov decided on five years, and said there were no extenuating circumstances that would warrant keeping Navalny out of prison.
Navalny's co-accused, Pyotr Ofitserov, was also found guilty, and given a four-year jail sentence.
Navalny insists that Mr Opalev spoke against him out of revenge, because Navalny had recommended he be fired and his company investigated for corruption.
Mr Navalny came to public attention when he inspired mass protests against the Kremlin and President Vladimir Putin in December 2011.
He is now one of the key figures of the opposition - a thorn in the side of the political establishment, campaigning against the endemic corruption.
