The ruling came five months after a new government took power with Mr Najib’s Malay party the biggest bloc in the alliance.
His party’s shocking election ouster in 2018 was driven by public anger over the 1MDB scandal.
“I find the accused guilty and convict the accused of all seven charges,” Judge Mohamad Nazlan Ghazali said after spending two hours to read out his ruling.
Mr Najib has promised to appeal. He has said he was misled by rogue bankers and the case against him is political.
Analysts said the ruling would bolster the prosecution’s case in Mr Najib’s other trials.
He faces 42 charges in five separate trials and could face years in prison.
Mr Najib set up 1MDB shortly after becoming prime minister in 2009 to ostensibly accelerate Malaysia’s economic development.
But the fund accumulated billions in debt, and US investigators allege that at least $4.5 billion US dollars (£3.5 million) was stolen from it and laundered by his associates to finance Hollywood films and buy hotels, a luxury yacht, artwork, jewellery and other extravagances.
More than $700 million (£546 million) from the fund allegedly landed in his bank accounts.
Mr Najib’s wife and several officials from his party and previous government have also been charged with graft.
Evidence showed a complex trail of money through the accounts that paid for renovating Mr Najib’s home, credit card purchases including a Chanel watch bought in Hawaii as a birthday gift for his wife, and disbursements to political parties.
He has said he was misled by rogue bankers led by Malaysian fugitive financier Low Taek Jho, identified by investigators as a mastermind in the looting of 1MDB.
Mr Najib testified he assumed the money was part of an Arab donation arranged by Mr Low.
His lawyers said Mr Low used the donation as a guise to keep him from being suspicious of his plundering of the 1MDB fund.
Prosecutors argued he was the real power behind 1MDB and called the Arab donation “manufactured evidence” to cover up his tracks.