They were also ordered by the court in Milan to pay a fine of €500,000 to Italy's national tax agency.
Lawyers for Dolce and Gabbana, whose celebrity clients include Beyonce and Madonna, immediately said they will be appealing, and under Italian law the sentence will be suspended in the meantime.
Domenico Dolce and Stefano Gabbana were found guilty of having transferred control of their brands to a shell company in Luxembourg in 2004 and 2005 to avoid paying Italian taxes.
Prosecutors had argued that setting up the Luxembourg company Gado – an acronym of the surnames of the two designers — while the company was operating out of Italy was a bid to defraud the state. They had called in May for the pair to be sentenced to two years and six months in prison.
In her closing speech, prosecutor Laura Pedio said there was "rock-solid proof" that the duo had committed "sophisticated tax fraud". She said Gado was "a sort of cloud with the consistency of gas," while fellow prosecutor Gaetano Ruta said it was "an artificial construction the aim of which was to get a tax advantage".
Although Dolce and Gabbana had originally been accused of tax evasion of around one billion euros, the court ruled that just €200 million of that sum was relevant.
Four other people, including Dolce's brother Alfonso, were given suspended sentences.
Investigators completed a probe into the designers, as well as five other people, in 2010 and the case was dismissed in April 2011 but reopened in November last year and went to trial.
"All that I care about is making clothes, that's all. Let them do and say whatever they want," Gabbana tweeted about the trial in April. "To be accused of something that's not true is not a pretty thing, but the heart of the matter is, who cares, we'll all end up in the ground in the end," he said.
Founded in 1985, Dolce & Gabbana employs more than 3,000 people and has 250 shops in 40 countries around the world.