Chief Commissioner Bhakta Bahadur Koirala read out the verdict, saying Deuba was also fined 90 million rupees (US$1.2 million) Prakash Man Singh, a former Cabinet minister, was handed the same sentence.
Deuba was sacked in February following accusations that his administration misused 370 million rupees (US$5.3 million) in awarding a contract in connection with a road construction project.
"The granting of the contract was done with ill intentions that financially harmed the government," said Koirala. "It has been proven that the contract was granted to an unqualified contractor. The estimate was unrealistic."
Deuba listened to the verdict calmly, without any reaction or comment.
Government lawyers had sought a 13-year prison term for Deuba and Singh.
Deuba has insisted that the commission is illegal and has refused to cooperate. He also declined to post bail and answer questions.
King Gyanendra set up the commission after firing Deuba and his government on Feb. 1 as part of a wider sweep to seize absolute power. The monarch said the move was necessary to quell a nine-year communist insurgency and stamp out corruption.
Deuba was among hundreds of politicians and activists arrested after the king's power grab. He was freed then re-arrested in April to face the embezzlement charges.
Last month, the commission cleared Deuba and six members of his sacked Cabinet of separate graft allegations.
