Last year, the European Court of Human Rights based in Strasbourg declared the 2013 conviction "prejudicial," saying that the defendants were denied the right to a fair trial. In November, Russia's Supreme Court declared a retrial. The Kremlin has denied interfering in any cases.
In the courtroom, Navalny complained that the guilty verdict was identical to the one delivered in 2013 despite the violations cited by the European Court of Human Rights.
Navalny vowed to keep campaigning while he appeals.
"What we have just seen is a telegram of sorts from the Kremlin, saying that they consider me, my team and people whose views I represent too dangerous to be allowed into the election campaign," he said. "We do not recognise this verdict, it will be overturned, and ... I have the right to run in the election."
Navalny's popularity is largest among the urban middle class in Russia, which represents a minority of the electorate, but has an outsized presence in Russian political life and the media.
Navalny ran in the Moscow 2013 mayoral elections, garnering 27 per cent of the vote. He has said he will remain politically active.
- additional reporting AP