A judge ruled she had criminally exceeded her powers when she signed a gas deal with Russia in 2009.
Mrs Tymoshenko said the charges against her were politically motivated and vowed to fight for Ukrainian democracy "till her last breath".
Riot police are outside the court as supporters and opponents gather and there have been minor clashes.
The judge said the former prime minister would also have to pay back 1.5bn hrivnas ($186m) lost by the state gas company as a result of the deal.
As the verdict was read out, Mrs Tymoshenko spoke over the judge, saying she would "fight to defend my honest name", adding that Ukraine had returned to the repression of Stalin's 1937 Soviet Union.
The US and the EU have condemned the charges against Mrs Tymoshenko and some of her allies as selective prosecution of political opponents.
European officials suggested that jailing Mrs Tymoshenko would be a serious blow to the country's hopes of integration with the European Union.
However, former president and one-time ally Viktor Yushchenko and others have testified against her.
Russia pipes gas to western Europe across Ukrainian territory and relations between the two ex-Soviet states have long been dogged by disputes over transit fees and unpaid bills.
'Not very optimistic'
The former Orange Revolution leader was accused of exceeding her authority while negotiating the gas agreement with Russia in 2009, which critics say was to Ukraine's disadvantage.
"In January 2009, Tymoshenko... exercising the duties of prime minister... used her powers for criminal ends and, acting deliberately, carried out actions... which led to serious consequences," Judge Kireyev said.
As a result of ordering state gas company Naftohaz to sign an import contract with Russia in 2009 she inflicted damages of 1.5bn hrivna on the company, he added.
As the verdict was read out over several hours, Mrs Tymoshenko stared at her iPad, apparently not listening to the judge, occasionally exchanging whispers with her daughter, Evgenia Carr.
Mrs Tymoshenko - who has been in custody for contempt of court since 5 August - denies any wrongdoing.
'Honest name'
During a break in the proceedings, Mrs Tymoshenko made a statement to journalists, saying human rights organisation the Helsinki Group had declared the charges politically motivated.
She said that "no-one can besmirch my honest name".
She compared the state of the country to the Soviet Union in 1937, the height of Stalinist repression.
Mrs Tymoshenko was the heroine of the Western-leaning Orange Revolution - the sudden street protests that erupted after a fraudulent presidential election in 2004 - and was made prime minister shortly afterwards.
But the next few years saw Ukraine's revolution stagnate, and were marred by bickering between Mrs Tymoshenko and her Orange allies, which paralysed the country just as it was facing a deep economic crisis.
In 2010 the revolution was definitively reversed, when Mr Yanukovych was elected president, and Mrs Tymoshenko forced into opposition.
http://www.bbc.co.uk/news/world-europe-15250742
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