The incident took place on 25 July 2003, at an Israeli occupation army roadblock outside the northern West Bank town of Jenin.
According to Israeli and Palestinian sources, a soldier manning a military vehicle opened fire on an approaching Palestinian car in which Mahmud Jaradat, 3, was riding with his mother, grandmother and the driver.
Mahmud died instantly after he was hit by several bullets.
According to the indictment sheet, a copy of which Aljazeera.net obtained, the soldier, who was not identified, was charged with secondary charges, including negligence, not paying sufficient attention to the behaviour of soldiers under his command and inappropriate use of arms.
The court reportedly cited several mitigating circumstances in the case, including "the war with the Palestinians", "Palestinian terror" and "psychological pressure on the soldiers".
Palestinians say light sentences
amount to a 'tacit licence to kill'
Two other soldiers stationed at the roadblock reportedly received a rebuke for "negligence and inappropriate behaviour".
The soldier who killed Mahmud will carry out "service works" in military camps, such as cleaning, sanitary work and kitchen work.
Israeli army spokesman Eitan Arusi said: "The IDF (Israeli Defence Forces) looks into every incident where innocent Palestinians are hurt by IDF troops."
The Palestinian Authority condemned the Israeli military court sentence as amounting to a "tacit licence to kill Palestinian children".
"This sentence is a clear message to Israeli soldiers that they may murder Palestinian children and civilians with impunity," said Hana Isa, director-general of the Palestinian Ministry of Justice.
He told Aljazeera.net that as many as a thousand Palestinian children have been killed or grievously injured by occupation soldiers since the outbreak of the Palestinian intifada, or uprising, in September 2000.
"Israeli soldiers knowingly and deliberately murder our children ... and the soldiers involved are either rebuked or given a few weeks' suspended sentence for negligence"
Palestinian Justice Ministry
"They (Israeli soldiers) knowingly and deliberately murder our children, and when there is an outcry over a specific crime, the soldiers involved are either rebuked or given a few weeks' suspended sentence for negligence or inappropriate use of firearms.
Isa said the PA was documenting Israeli crimes against Palestinian civilians.
"When the time comes, we will present all these files and documents to an international tribunal. The blood of our kids will not go in vain."
Killing of girl
A few months ago, an Israeli military court exonerated an Israeli soldier, dubbed Captain R, who last year killed a 9-year-old Palestinian girl as she was on her way to school in the southern Gaza town of Rafah.
After shooting the girl, the soldier returned to the child's body, shooting her 20 more times.
The soldier was rebuked for "inappropriate use of army-issued weapons" and returned to his army unit.