Ali Berzengi, 29, and Ferman Abdulla, 25, were found guilty on Thursday of "receiving and transferring large sums to the terrorist organisation Ansar al-Islam with the aim that the money be used for terror crimes", the court ruled.
Ansar al-Islam is a proscribed group in Sweden headed by the exiled Mullah Krekar, a Kurd, residing in Norway.
The crimes included "among other things taking life and thereby creating fear among the inhabitants of Iraq, as well as seriously destabilising the basic political and social structures there", the court added.
The two men, who are the first to be charged under the new anti-terror legislation introduced in Sweden in July 2003, were sentenced to seven and six years behind bars, respectively.
Once they have served their sentences they will be deported from Sweden and barred from ever returning, the court said.
The pair are alleged to have
financed bombings in Iraq
Prosecutor Agneta Hilding Qvarnstroem, who had called for both men to receive prison sentences of between eight and 10 years, charged among other things that the men had transferred $9700 that helped fund a bombing in the northern Iraqi city of Arbil on 1 February 2004, that left more than 100 people dead.
The pair's defence lawyers said the money was sent to "people who needed help, for social causes", and not to pay for bombings.
"The court has found that the evidence is so convincing that the prosecutor has succeeded in backing up her claims," the court said, explaining why the two men received what in Sweden are considered long prison terms for participating in the planning of attacks.
"Due to the seriousness of the crime, the court has also in the question of deportation decided to follow the prosecutor's line, despite the fact that one of the defendants is married in Sweden and has children here," the court stated.
"The evidence is so convincing that the prosecutor has succeeded in backing up her claims"
Among the damning evidence were documents found in the defendants' homes, tapes of their tapped phone conversations, as well as material gathered by foreign intelligence services, according to the court ruling.
Abdulla's defence lawyer Ola Salomonsson said he had not yet discussed with his client whether or not to appeal the verdict.
"That's a decision he will have to make after going over the court ruling," he told reporters.
The two defendants were arrested with two other men in Sweden last April suspected of direct participation in attacks in Iraq.
Due to lack of evidence, however, prosecutors were forced to drop the charges against the other two men at the end of last summer and to reduce the charges against the two defendants.