Giuseppe Profiti, the former president of the Vatican-run Bambino Gesu Pediatric Hospital Foundation, was given a one-year suspended prison sentence for "abuse of power" over diverting €422,000 ($500,000) to fund the renovations.
Cardinal Tarcisio Bertone, a former number two at the Vatican under pope Benedict XVI, received in 2013 the spectacular apartment, which is just a stone's throw from Pope Francis's modest boarding house.
Despite being mentioned repeatedly throughout the trial, the 82-year-old cardinal was never called as a witness.
The prosecutor said that the incident looked "dreadful" and was characterised by "silence and opacity and poor management of public affairs".
He had requested three years in prison for Profiti.
The second defendant in the trial, the foundation's treasurer, was found not guilty.
'The idea was mine alone'
Spread across hundreds of square metres at the top of the Palazzo San Carlo, the cardinal's residence boasts a huge terrace with magnificent views over Rome.
Profiti testified that hospital funds were used for the renovation with the idea that the cardinal could host intimate dinners for eight to ten wealthy potential donors at a time.
Bertone approved the concept, but "the idea was mine alone," Profiti told the court.
Profiti acknowledged financial controls surrounding the spending had been lax, saying he could not recall if any contracts had been drawn up. The work was carried out between November 2013 and May 2014.
Pope Francis has vowed to eradicate clerical extravagance, slamming his fist on a table after the luxurious lifestyle of several cardinals was revealed by media reports in 2015 and saying that they cannot "lead the life of a pharaoh".
Bertone gave up his position as a number two in the Holy See hierarchy months after Francis's election in 2013, and retired from his last Vatican duties in December 2014.
In late 2015, a new director of the hospital asked Bertone to plug the funding gap. Bertone made a donation of €150,000.
The renovation has been widely depicted in the Italian media as reflecting the once-powerful cardinal's desire to spend his retirement in maximum comfort and elegance.