The regional court in Essen handed down a slightly shorter sentence than prosecutors had been calling for.
"I cannot accuse myself of any wrongdoing," Middelhoff said after sentencing.
The prison term is too hefty to qualify to be suspended.
The former CEO was founded guilty on 27 counts of defrauding his former employer Arcandor, now bankrupt, of an estimated 800,000 euros ($997,000).
Middelhoff denied has vehemently denied the charges throughout the proceedings. In his closing remarks, he again stressed that his plan in joining Karstadt's former parent company was to "save the firm and preserve jobs."
He has described the five-year investigation and subsequent trail a nightmare. "I feel that my dignity and honour have been violated."
Middelhoff, 61, will be allowed to appeal the sentence.