"Staff Sergeant Cardenas Alban was convicted on one count of murder and one count of conspiracy to murder at a court martial at the 1st Cavalry Division courthouse at Camp Liberty today," a military spokesman said on Friday.
Alban is the second American soldier to be court martialled over the incident.
Last month, Staff Sergeant Johnny Horne was sentenced to three years in jail, reduction in rank and dishonourable discharge from the military after pleading guilty to charges of murder and conspiracy to commit murder.
Another US military officer, 2nd Lieutenant Erick Anderson, has also been charged with premeditated murder and conspiracy to commit premeditated murder over the incident.
Sadr City killings
The cases stem from an incident on 18 August when Alban, Horne and Anderson were part of a US army patrol in Baghdad's Sadr City district during a period of intense clashes with fighters loyal to Shia cleric Muqtada al-Sadr.
US soldiers saw a group of Iraqi men in a garbage truck who they suspected were placing bombs along a road, and opened fire on them. Several Iraqis were killed.
Alban and Horne were accused of fatally shooting an Iraqi man who suffered severe abdominal wounds and burns after the initial barrage of gunfire. US military officials have described the incident as a "mercy killing".
Several US soldiers have faced courts martial for crimes in Iraq, most notoriously the soldiers charged with abuse of Iraqi prisoners at Abu Ghraib prison west of Baghdad.
Revelations of the abuse generated worldwide outrage.