Navalny, a blogger and prominent Russian opposition leader, was sentenced to five years in prison Thursday for selling timber at below-market prices in 2009, state-supported RIA Novosti reported. His codefendant Pyotr Ofitserov was sentenced to four years in jail.
Thousands of protesters gathered outside the court proceedings in Kirov, two of whom were briefly detained.
Yevgeny Kokoulin, a human rights advocate, told RIA Novosti that both men submitted written complaints to police that they were pushed to the ground and roughly handled during their arrest.
U.S. Ambassador to Russia Michael McFaul tweeted about his disappointment with Navalny's conviction, RIA Novosti said.
"We are deeply disappointed in the conviction of Navalny and the apparent political motivations in this trial," McFaul tweeted.
"#Navalny" became the second most popular Twitter hashtag in Russia on Thursday, followed by "#littlethiefjailed," a reference to Navalny.
Former Soviet President Mikhail Gorbachev released a statement Thursday also voicing regret at Navalny being found guilty, ITAR-Tass reported.
"All I know about this case, how it started, then closed and reopened again, and how it was examined in court unfortunately confirms that we have no independent court," Gorbachev said. "Without going into details I want to say that this case left a very grave impression upon me. I am convinced that it is inadmissible to use of courts for fighting political opponents."
Navalny and Ofitserov were found guilty of organizing an embezzlement scheme that cost state-owned company KirovLes about $500,000, by forcing it to sell timber at below-market prices when he was an adviser to the Kirov regional governor in 2009, RIA Novosti said.
Navalny, who maintained the case was politically motivated, was led out of the courtroom soon after sentencing.
Unless overturned on appeal, the conviction bars Navalny, a whistle-blowing blogger known for leading anti-government protests, from seeking public office, RIA Novosti said.
The court issued a fine of about $31,000 that will be divided between the two men.
Both said they would appeal. Navalny's supporters pledged to conduct unsanctioned demonstrations in Moscow and other communities, the report said.