The fashion designers, Domenico Dolce and Stefano Gabbana, have been sentenced to 20 months in prison for tax evasion.
A court in the fashion capital of Milan found the pair guilty of failing to declare €1bn (NZ$1.69bn) of income.
Prosecutors said the designers sold their D&G and Dolce & Gabbana brands to their own holding company, Gabo, in Luxembourg in 2004 for €360m (NZ$606m) - a third of its market value - to slash their tax liability.
This, plus other dodges, meant the designers owed more than €400m (NZ$674m) in tax.
The statute of limitations ran out on a charge of misrepresenting income. The pair denied the charges. "Everyone knows that we haven't done anything," Gabbana tweeted in June 2012 after the trial was ordered. He later threatened to leave Italy if the court case went ahead.
During the trial, prosecutor Laura Pedio said there was "granite-like evidence" of "sophisticated tax fraud" against the two.
The fashion heavyweights are in no immediate danger of jail time, however.
They will remain free at least until two appeal processes have been exhausted.
Dolce and Gabbana were acquitted of tax fraud charges in April 2011. But following an appeal, prosecutors were allowed reopen the case, by dropping the fraud allegations but pressing the tax evasion charges