"The court confirms the sentence against Silvio Berlusconi," a judge in Milan said in a live audio feed broadcast by news channel Sky TG 24.
Berlusconi is now expected to appeal the ruling in Italy's highest court, which would suspend the punishment pending a final ruling in the case which revolves around his Mediaset business empire.
"We knew it would go like this," Berlusconi's defence lawyer Niccolo Ghedini told reporters.
"I do not think there is a connection between this verdict and political stability," said Ghedini, who is also a lawmaker from Berlusconi's People of Freedom party.
Berlusconi's party is now an influential member of a grand coalition government led by leftist moderate Enrico Letta and could bring down the cabinet if it wanted to.
The appeal verdict was the latest twist in a 20-year legal saga that began when the flamboyant billionaire first burst onto the political scene.
The case revolves around the prices of film distribution rights bought by Mediaset that were artificially inflated in order to avoid taxes.
The media tycoon is also a defendant in a trial for having sex with an underage 17-year-old prostitute while he was still prime minister, and then abusing the powers of his office by putting pressure on police to release her from custody.
A verdict in that case is expected imminently.
The 76-year-old Berlusconi was also convicted in March over the publication of police wiretap transcripts in a newspaper he owns, which were leaked in order to discredit a political rival.
Berlusconi has been convicted before but all his convictions have either been overturned on appeal or have expired under the statute of limitations.
Supporters and Berlusconi himself say he is unfairly victimized by left-wing judges who are out to get him, but critics say he has used his influence and wealth to dodge the law.
Even if his convictions are upheld throughout the appeals process, Berlusconi is unlikely ever to see the inside of a prison cell as sentencing guidelines for over 70s in Italy are lenient.