Iñaki Urdangarin, who is married to the King’s sister Cristina, was found guilty of taking advantage of his royal connections to win inflated public contracts to stage sporting and other events, then siphoning off the proceeds to fund a lavish lifestyle.
Urdangarin, a 49-year-old businessman and former Olympic handball player, and his business partner Diego Torres were accused of embezzling about €6m (£4.6m) in public money that was paid to their non-profit organisation, the Nóos Institute, to organise events.
Torres was given an eight-year prison term by the Spanish court.
Meanwhile, Cristina has been cleared of helping her husband evade taxes after a year-long trial although she was ordered to pay a €265,000 fine for “civil responsibility” for indirectly and unknowingly benefitting from her husband’s activities.
She was accused of siphoning off money from a state-backed real estate company, Aizoon, set up by her husband, which she used to pay for clothes and dance lesson for the couple’s children, as well as work on the their Barcelona mansion.
The prosecution claimed Cristina could not have been unaware of her husband’s activities.
A spokesman for the royal family told Spanish media that it respected the court’s decision.
Cristina is the first royal to face criminal charges since the restoration of the Spanish monarchy in 1975 and could have gone to prison for eight years if she had been found guilty.
The princess and her husband, who married in a lavish ceremony in Barcelona in 1997, were among 18 co-defendants facing a total of 89 charges ranging from fraud and money laundering to trafficking of influences.
The couple’s multimillion-euro mansion has been impounded by the courts.
The trial has further tarnished the image of Spain’s royal family, who have repeatedly been dogged by accusations of corruption.
King Felipe has sought to clean up the monarchy’s public image since ascending to the throne following the abdication of his father, Juan Carlos, in 2014.
He removed Cristina and her sister Elena from royal duties soon after and stripped Cristina of her title of Duchess of Palma a year later as she prepared to face trial.