Elor Azaria was found guilty of manslaughter for shooting dead 21-year-old Abdul Fatah al-Sharif in Hebron, in the occupied West Bank, last March.
Azaria had told a colleague that Sharif, who had stabbed another soldier, "deserved to die".
Military chiefs condemned his actions, but others praised them.
The case fuelled debate in Israel over when and how soldiers are entitled to use lethal force against attackers.
The shooting occurred amid a wave of attacks by Palestinians that had killed 29 Israelis over the preceding five months.
The offence carries a sentence of up to 20 years, though prosecutors had called for Azaria to be jailed for between three and five years.
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