Erbakan, 77, a veteran politician, was among 70 Islamists charged with misappropriating one trillion lira ($3.6 million) of funds from the now-defunct Welfare Party.
He has the right to appeal once against the sentence. If his appeal fails, he will probably spend one year in prison, the Anatolian news agency said.
He would also lose the right to stand in elections or join a political party.
The rotund Erbakan served as prime minister in a coalition with conservatives for one year until the army helped dislodge him from office in June 1997 after deciding he posed a threat to Turkey's strictly secular political order.
The charges against him date back to that time, when, Anatolian said, Welfare Party officials tried to squirrel away cash before the party was shut down.
Erbakan's sentencing comes at a time when secular Turkey is cracking down on Islamists after four bomb attacks in November that killed 61 people.
Erbakan has never publicly advocated violence in the pursuit of political aims.
Erdogan's AKP traces its roots
to Islamist parties
Two lawmakers from the current ruling party, the Justice and Development Party (AKP), were also suspects in the case but could not be charged because they have parliamentary immunity.
Prime Minister Tayyip Erdogan's AKP traces its roots back to banned Islamist parties such as Welfare, though he has steered a more pro-Western course than Erbakan. The AKP says it does not follow a secret religious agenda.
Nevertheless Turkey's secular establishment, including the army, monitors its actions closely and sometimes clashes with the government, especially on the issue of whether Muslim women can wear headscarves in public places.