State prosecutors had asked the court to jail Navalny for six years on charges of organising a scheme to steal at least 16 million roubles ($494,000) from a timber firm when he was advising the Kirov region governor in 2009.

But even a five-year sentence means he will not be able to run in the next presidential election in 2018 or for Moscow mayor in September as he had planned. Some political analysts had expected the court to hand down a suspended sentence, to keep Navalny out of prison but rule out any political challenge.

The United States and European Union expressed concern over the conviction, saying it raised questions about the rule of law in Russia and Putin’s treatment of opponents.

A White House spokesman said on Thursday the United States is “deeply disappointed and concerned” at the conviction of Russian opposition leader Alexei Navalny and called on Russia to allow an appeal and cease pressure on anti-corruption activists.

“Navalny’s harsh prison sentence is the latest example of a disturbing trend aimed at suppressing dissent in civil society in Russia,” White House spokesman Jay Carney said at a briefing.

Carney said charges of embezzlement against Navalny were “politically motivated,” adding that the case reinforces US concerns about the rule of law in Russia.

“We urge Russia to allow for a fair and impartial appeal of the verdict,” Carney said.

Russian shares fell on concerns the ruling could provoke social unrest, after a case that has led to comparisons with the political “show trials&rd

quo; under Soviet leader Josef Stalin.

In a last message from court, Navalny, 37, referred to Putin as a “toad” who abused Russia’s vast oil revenues to stay in power, and urged his supporters to press on with his campaign.

“Okay, don’t miss me. More important - don’t be idle. The toad will not get off the oil pipeline on its own,” he wrote on Twitter.

Two people were detained in a small protest in Kirov. At least 3,000 gathered near the Kremlin in Moscow and at least 10 people were detained, with police going into the crowd to pluck out people who held up portraits of Navalny. Some motorists honked their horns in support of the protests.

Rallies were also held in St Petersburg, Yekaterinburg in the Urals but no big clashes were reported.

Public support for Navalny is limited, and Putin remains popular with many Russians. The independent Levada polling group had put the opposition leader on only about eight per cent support in the Moscow mayoral election, but put Putin’s job approval rating at 63 per cent in June.

Judge Sergei Blinov read the verdict rapidly and without emotion in the packed Kirov courtroom, hardly looking up as he took about three and a half hours to explain his conclusions.

“The court, having examined the case, has established that Navalny organised a crime and ... the theft of property on a particularly large scale,” he said.

Pyotr Ofitserov, Navalny’s co-defendant, was convicted as an accomplice and sentenced to four years in prison.

Navalny, a powerful orator who has accused the authorities of being “swindlers and thieves”, stood in silence with a puzzled expression as he listened to the verdict. He has 10 days to appeal, and his lawyer, Vadim Kobzev, said he would do so.

The head of his campaign staff, Leonid Volkov, said Navalny had told him he would withdraw from the Moscow race if he was jailed, and that Navalny would make a statement about this on Friday. “There is no sense in taking part in it,” Volkov said.

Navalny had said the charge against him was politically motivated and that the verdict would be dictated by Putin.

He denied guilt and pointed out that an initial investigation, over accusations that he had pressured a state forestry company to agree to a disadvantageous deal with a middleman firm, had been closed for lack of evidence.

Since Putin returned to the presidency after four years as prime minister, women from the punk band Pussy Riot have been jailed for a protest against him in Russia’s main cathedral, and 12 opposition activists have gone on trial over violence that erupted at a protest on the eve of his inauguration in May last year.

Another protest leader, Sergei Udaltsov, is under house arrest in what the opposition says is a crackdown on dissent.

The Kremlin denies that Putin uses the courts for political ends, and the judge rejected Navalny’s claim of political motivation. Putin’s spokesman, Dmitry Peskov, did not immediately answer calls after the sentence was pronounced.

Opposition politician Boris Nemtsov, who attended the hearing, said he was “shocked”. “With today’s ruling, Putin has told the whole world he is a dictator who sends his political opponents to prison,” Nemtsov told Reuters.

Former finance minister Alexei Kudrin, a longtime Putin ally, saw the verdict as “an attempt to isolate him (Navalny) from society and the electoral process”.

The US ambassador to Russia, Michael McFaul, said the United States was “deeply disappointed” and saw political motivations. A spokesman for EU foreign policy chief Catherine Ashton said the charges had not been substantiated and this raised “serious questions” about the rule of law in Russia.

Kudrin said the verdict would hurt business activity and the investment climate in Russia, adding to a pall over a country where corruption and lack of property rights undermine the attraction of potentially big profits.

Navalny is the most prominent opposition leader to be prosecuted in Russia since Soviet times.

“For Russia, there is nothing unusual about convicting political opponents on criminal charges,” imprisoned former oil tycoon Mikhail Khodorkovsky wrote, adding it was a common practice during Stalin’s “terror” in the 1930s.

Khodorkovsky was jailed in 2005 for tax evasion and fraud after he fell out with Putin. His $40 billion company, Yukos, was carved up and sold off, mainly into state hands, and he was convicted of theft and money-laundering at a new trial in 2010.

William Browder, a Briton who was once one of Russia’s biggest foreign equity investors but fell foul of the authorities, also referred to the start of Stalin’s show trials by saying: “This is like 1937 all over again.”