The sentencing by special CBI judge Pravas Kumar Singh disqualifies the RJD leader from Parliament and renders him ineligible for contesting elections for 11 years.
65-year-old Prasad and other convicts are currently lodged in the Birsa Munda Central Jail here.
Former Bihar chief minister Jagannath Mishra and Janata Dal-United MP Jagdish Sharma also sentenced to four years imprisonment each in the case.
While Mishra was fined Rs 2 lakh, Sharma has been fined Rs 5 lakh.
Prasad was convicted in the 17-year-old case on corruption and other charges that disqualifies him from Parliament.
Six other politicians and four IAS officers, among the convicted, were also sentenced to prison terms for fraudulent withdrawal of Rs 37.7 crore from Chaibasa treasury when Prasad was heading the RJD government in the early 1990s.
Of the 45 convicts, the judge had delivered the sentence against eight of them on September 30 itself.
Earlier today, arguments on the quantum of sentence Prasad and 36 other convicts were completed in the special court here with CBI seeking maximum prison term of up to seven years for them.
The counsel of Yadav, Mishra, sitting JD(U) MP Jagdish Sharma, former legislator R K Rana and others had pleaded for lesser sentence.
Former Development Commissioner Phoolchand Singh, former Science and Technology Secretary Mahesh Prasad, former AHD Secretary Beck Juleus, former Income Tax Commissioner Adhip Chandra Choudhary, former Class I officers Gouri Shankar Prasad, Brajnandan Sharma, K M Prasad (all three were with the Animal Husbandry Department) and other officials, suppliers were among those found guilty.
A sitting from Jahanabad, Sharma also faces disqualification in the wake of a Supreme Court judgement that an MP or MLA would stand disqualified immediately if convicted by a court for crimes with punishment of two years or more and under some other laws even without jail sentence.
RJD spokesperson Manoj Jha has said that the verdict would be challenged in a higher court.
None of the convicts were present in the court and the sentencing was done through video conferencing.
The special court had earlier granted bail to eight of the convicts as they had been sentenced to three years imprisonment, a prison term that allows them to move for bail in the same court.