"The court finds the FSIN’s [Federal Penitentiary Service] presentation to be satisfied," judge Natalya Repnikova read the decision.
Taking into consideration the time Navalny previously spent under house arrest, the real sentence will be 2 years 8 months, the court said.
The decision to change the suspended sentence has not yet entered into force. The parties have ten days to appeal the ruling.
Navalny's defence will appeal the court's ruling, his lawyer Vadim Kobzev said.
The United Kingdom considers the arrest of Navalny a breach of Moscow's international commitments and urges for his immediate and unconditional release, UK Foreign Secretary Dominic Raab said on Tuesday.
The US Secretary of State Antony Blinken said that his country will closely coordinate with its allies and partners on the court ruling for Navalny.
There have been three hearings on replacing Navalny's suspended sentence with real prison time, but each time, the courts rejected the requests of the detention authority and extended the parole. Meanwhile, Navalny has missed nearly 60 check-ins with the authorities in the last three years (he is supposed to check in twice a month) and received multiple minor penalties, such as fines and short arrests.
Each of these issues taken separately provides grounds for cancelling the suspended sentence.
Despite claims that Navalny is facing court due to his political activity, the European Court of Human Rights ruled that there was no political reasoning behind the fraud case linked to Yves Rocher company. The court ruled only that Navalny was to be compensated for house arrest, and the Russian authorities paid the compensation.
About 20 foreign diplomats were present during Tuesday's hearing in Navalny's case. The Russian Foreign Ministry spokeswoman Maria Zakharova said that their presence at the trial amounted to interference in Russia's internal affairs.
"The process here is open, so everyone who wanted could get into it. But this has nothing to do with normal diplomatic practice, with the norm. This is a political action ... I want to say that how Western diplomats behaved today in relation to the court session and what their foreign ministries are now starting to scribble should be considered not only within today. This is a whole chain of relevant actions," Zakharova said.
Navalny returned to Russia from Germany last month after receiving medical treatment following a suspected poisoning in Siberia, evidence for which the German health experts allegedly found in his body, namely, traces of a nerve agent from the Novichok group. Moscow has consistently rejected the findings and requested for the evidence to be shared with it.