He garnered an unexpected 27 percent of the vote against the Kremlin-backed incumbent. His growing public profile has made it increasingly risky for the Kremlin to put him behind bars.
Navalny lambasted the trial, saying the original sentence had been handed down "on instructions from Moscow" and that the "political motivation of this case is absolutely clear."
The charges against him date back to when he worked as an unpaid adviser to the provincial governor in Kirov. Prosecutors said he was part of a group that in 2009 embezzled 16 million rubles ($500,000) worth of timber from the state-owned company Kirovles. He has denied the charges.
The defense said a company run by Pyotr Ofitserov Navalny's co-defendant, who also was given a suspended sentence of five years bought the timber for 14 million rubles and sold it for 16 million rubles in a regular commercial transaction.
Navalny, who spent much of the court session tweeting, was characteristically sarcastic and upbeat.
After the judge read out the sentence, Navalny told journalists he had no doubt that the decision had been made "personally by Vladimir Putin," and said that "the authorities are doing their utmost to pull me out of the political fight."
Under current law, Navalny is banned from running for political office for life. But last week Russia's highest court ruled that parts of the law were unconstitutional and asked the legislature to amend it so that people would only be barred for the duration of their sentence.
The law has been controversial in a country where, according to a 2011 survey by the Moscow-based Center for Legal and Economic Studies, one in six business people have faced criminal charges, and about 120,000 people are in jail for alleged economic crimes.
If those changes are implemented, Navalny would be able to run for office starting in July 2018, missing the next presidential election by only a few months.
In the meantime, Navalny has said he will concentrate on the city council elections in Moscow next year.
The authorities, who control almost everything in elections from advertising space to, in some cases, the ballot box itself, are gambling that Navalny will be less dangerous out of prison than in.
"The authorities are playing with the opposition. They want it to be integrated into the political system but on the conditions they establish," said Alexei Makarkin, an analyst at the Center for Political Technologies. "What the state doesn't want are massive street protests."
While Navalny's chants of "We are the power!" came to define the protests, he will likely become a less visible participant in coming years. Even detention at a protest could convert his suspended sentence into a real one.
Instead Navalny has dedicated himself to a flurry of new projects, all aimed at channeling the grassroots energy of his campaign into a movement independent of his personal brand.
He actively promotes petitions, which in Russia can be passed into law if they garner enough signatures, targeting issues such as banning state officials from owning expensive cars. He also has tried to get his party, the People's Alliance, registered for national elections.
"I don't want there to be the reign of some kind of eternal Navalny with a few loyal followers. ... There have to be dozens of them," he told the website Slon in September.
___
Mills reported from Moscow.
