Navalny, a whistle-blowing blogger who led protests in Moscow against Russian President Vladimir Putin, is accused of being involved with a criminal group that allegedly stole $500,000 worth of timber from state-run lumber company Kirovles, RIA Novosti reported.
The trial is in Kirov, about 500 miles from Moscow, where Navalny was working as an adviser to the regional governor when the alleged embezzlement took place.
Navalny has denied the charges and said they are politically motivated. His supporters said the sentence request was meant to silence Russia's opposition.
Prosecutors also asked for a five-year prison sentence and $30,000 fine for co-defendant Pyotr Ofitserov, a former colleague of Navalny who ran another lumber operation, RIA Novosti said.
Navalny was nominated as an official candidate in September's Moscow mayoral elections.
Russian law states that any prison sentence, even a suspended one, would bar Navalny from running for public office.