The soldier, Elor Azaria, had been on trial for manslaughter in a military court since May, with right-wing politicians defending him despite top army brass harshly condemning the killing.
Sentencing is expected at a later date. He faces up to 20 years in prison.
Judge Colonel Maya Heller spent more than two and a half hours reading out the decision, sharply criticising the arguments of Azaria's lawyers.
She called Azaria's testimony "evolving and evasive."
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Azaria's demeanour drastically changed as the judge read the verdict.
Dressed in a green army uniform, he had entered the courtroom smiling, with family members and supporters applauding him while one man embraced him.
But he and his family later looked shaken as the judge spoke, with his mother and father huddling together.
Azaria was 19 at the time of the killing in March 2016.
Today morning, dozens of protesters scuffled with police as they gathered outside Israel's military headquarters in Tel Aviv, where the verdict was announced.
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