Ai Takagi was jailed for 10 months, the stiffest sentence ever imposed for the offence in strictly governed Singapore, which clamps down hard on any activity seen as promoting racial and class hatred.
Takagi was the Australia-based editor and owner of "The Real Singapore", which enjoyed huge popularity but was shut down after she and her Singaporean husband were arrested while visiting the island last year.
Prosecutors said Takagi, 23, posted fabricated stories to generate hundreds of thousands of dollars in online advertising revenues for her site, which also had a Facebook page with a large following.
Takagi, who is eight weeks pregnant with her first child, read an apology in court before the sentence was handed down.
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She was given a month to settle her personal affairs before serving her prison sentence.
"Before this case started, I was not fully aware of the level of sensitivity needed when dealing with topics related to racial and religious issues in Singapore," she said in court.
"I sincerely apologise for the harm I have caused through my actions," said the Japanese-Australian law student, who expressed hope that she would someday be allowed to settle permanently in Singapore.
But critics say sedition laws, dating back to British colonial rule, can be used to clamp down on free speech.
About 40 per cent of the labour-starved island's 5.5 million people are foreigners, many of them from China, India and the Philippines.
Singapore has also cracked down on foreigners for sedition.
Last September Filipino nurse Ello Ed Mundsel Bello, 29, was jailed for four months after insulting Singaporeans online and calling on his countrymen to take over the city-state.