Former Ukraine leader Yulia Tymoshenko has been jailed for seven years.
A judge ruled the ex-prime minister had criminally exceeded her powers when she signed a gas deal with Russia in 2009.
Mrs Tymoshenko said the charges were politically motivated. She vowed to appeal against her sentence and fight for Ukraine "till her last breath".
The EU said it was disappointed with the verdict, and that Kiev's handling of the case risked deep implications for its hopes of EU integration.
EU foreign policy chief Catherine Ashton said in a statement the verdict showed justice was being applied selectively in politically motivated prosecutions.
Russian Prime Minister Vladimir Putin, who signed the deal with Mrs Tymoshenko, said he did not understand why she had been jailed.
"It is dangerous and counterproductive to cast the entire package of agreements into doubt," Mr Putin was quoted as saying by Reuters news agency.
Russia's foreign ministry had earlier said the ruling had a "clear anti-Russian subtext".
Riot police stood outside the court as thousands of supporters and opponents gathered. There have been minor clashes and some arrests.
In his ruling, Judge Rodion Kireyev said the former prime minister would also have to pay back 1.5bn hrivnas ($186m; £119m) lost by the state gas company as a result of the deal.
She has also been banned from political office for three years, with implications for her role in next year's parliamentary elections.
As the verdict was read out, Mrs Tymoshenko spoke over the judge, saying she would fight to defend her honest name.
She said Ukraine had returned to the repression of Stalin's 1937 Soviet Union, and accused her long-time rival President Viktor Yanukovych of orchestrating the trial.
She said she would take the case to the European Court of Human Rights.
"We will fight and defend my good name in the European court," she said. "We have to be strong and defend Ukraine from this authoritarianism."
After the judge finished the verdict, her supporters in the court shouted: "Shame, shame."
They believe Mr Yanukovych used the trial to get rid of her before the next presidential election.
Western officials had urged the president to reclassify the charges against her as administrative, not criminal.
AFP news agency later quoted Mr Yanukovych as saying the sentence was not final, and that the appeal court would have to decide whether to uphold it.
"Today the court took its decision in the framework of the current criminal code. This is not the final decision," he said.
'Not very optimistic'
The former Orange Revolution leader was accused of exceeding her authority while negotiating the gas agreement with Russia in 2009, which critics say was to Ukraine's disadvantage.
"In January 2009, Tymoshenko... exercising the duties of prime minister... used her powers for criminal ends and, acting deliberately, carried out actions... which led to serious consequences," Judge Kireyev said.
As a result of ordering state gas company Naftohaz to sign an import contract with Russia in 2009 she inflicted damages of 1.5bn hrivnas on the company, he added.
Russia pipes gas to western Europe across Ukrainian territory and relations between the two ex-Soviet states have long been dogged by disputes over transit fees and unpaid bills.
As the verdict was read out over several hours, Mrs Tymoshenko stared at her iPad, apparently not listening to the judge, occasionally exchanging whispers with her daughter, Evgenia Carr.
She has been in custody for contempt of court since 5 August.
Mrs Tymoshenko was the heroine of the Western-leaning Orange Revolution - the sudden street protests that erupted after a fraudulent presidential election in 2004 - and was made prime minister shortly afterwards.
But the next few years saw Ukraine's revolution stagnate, and were marred by bickering between Mrs Tymoshenko and her Orange allies, which paralysed the country just as it was facing a deep economic crisis.
In 2010 the revolution was definitively reversed, when Mr Yanukovych was elected president and Mrs Tymoshenko forced into opposition.
Former president and one-time ally Viktor Yushchenko and others have testified against her in the court case.