Lee was found not guilty of the charge of homicide through wilful negligence
The Sewol ferry was carrying 476 people when it went down. More than 300 died, most of them school students.
Lee Joon-seok was among 15 crew members on trial over the sinking, one of South Korea's worst maritime disasters.
Prosecutors charged him with homicide and called for the death penalty, but judges acquitted him on that charge.
Lee is in his late 60s, and with his jail term he will likely
spend the rest of his life in prison, says the BBC's Steve Evans in
Gwangju.
Our correspondent says the main question was whether there was intent to kill and there was evidence of negligence.
Crew members did not secure cargo which moved when the vessel
took a tight corner, toppling the ferry, and Lee was filmed leaving the
sinking ship while many passengers remained inside.
During the trial Lee apologised for abandoning them.
Fourteen other crew members were jailed on a raft of charges
The chief engineer of the ferry, identified by his surname Park, was found guilty of murder and jailed for 30 years.
Thirteen other crew members were given jail sentences of up
to 20 years on charges including abandonment and violating maritime law.
Relatives of victims were distraught at the verdict, with some weeping, according to AFP news agency.
One woman reportedly screamed in the courtroom: "It's not
fair. What about the lives of our children? They (the defendants)
deserve worse than death."
How South Korea ferry disaster unfolded
The disaster had triggered nationwide grief followed by
outrage, with revelations of mismanagement by ferry operators and lapses
in the emergency response.
Hours before the verdict, the South Korean government called off the search for bodies in the vessel, which sank on 16 April.
A total of 295 bodies have been retrieved by teams of divers but nine people remain unaccounted for.
Public fury
The case led to severe criticism of safety standards and of the government's handling of the rescue operation.
Images from the 16 April incident show Lee being rescued from the sinking ferry
Relatives of the nine missing people have been staying at a gym near the site of the sinking since April
The South Korean coast guard is due to be disbanded and
replaced with a new agency after accusations that it did not act swiftly
or aggressively enough to save lives.
The disaster has been blamed on a combination of illegal
redesigns, the overloading of cargo and the inexperience of the crew
member steering the vessel.
There was public fury after survivors testified that they had
been told by the crew to stay put even as the boat started to sink.
At the end of the trial last month, Mr Lee said he had
committed a crime for which he deserved to die - but denied that he had
intended to sacrifice the lives of the passengers.
The widespread outcry over the case had led to doubts over whether the crew would get a fair hearing.
A separate trial is taking place for employees of the firm that operated the ferry, Chonghaejin Marine Co.
The owner of the company and billionaire businessman Yoo Byung-eun disappeared after the disaster and was later found dead.
Meanwhile last week three of his relatives were jailed for
embezzlement, while a French court is due to decide next month on
whether to extradite Yoo's daughter on similar charges.