"The tribunal imposes the death penalty. But taking account of the Constitutional Court decision, this sentence is commuted to life in prison," said Judge Tamerlan Aguzarov, the chief justice of the North Ossetia supreme court.
Russia has a moratorium on capital punishment.
A life sentence had been widely anticipated despite the prosecution's request that an exception be made to the ban on executions to allow Nurpashi Kulayev, 25, to be put to death over his role in the Beslan hostage massacre.
Kulayev, who appeared calm as he stood behind a transparent, bullet-proof barrier in the courtroom, dismissed the judgement against him, saying: "These are made-up fairy tales."
Kulayev was found guilty of taking hostages, named responsible for the deaths of 330 people and inflicting material damage worth 34 million roubles ($A1.71 million).
Judge Tamerlan Aguzarov said that Kulayev detonated a bomb that had dealt bodily harm to hostages and government troops.
The judge said 16 hostages whom the militants executed on the first day of the assault had died in part due to Kulayev's actions.
Mothers of the victims, wearing mourning black, crowded the courtroom today, the eighth day of the verdict reading, to hear the sentence.
Some held banners reading, "There is no forgiveness of the authorities who let Beslan happen," and photos of tanks and dead children.
Survivors and victims' relatives also claim many deaths occurred because troops fired at the school from tanks and flame-throwers, sparking a fire that caused the roof to collapse over many wounded.
Kulayev has admitted to being present at Beslan's School Number One on September 1, 2004, when a large group of gunmen reportedly demanding the withdrawal of Russian troops from Chechnya seized more than 1,000 children, parents and teachers and held them hostage inside the school.
But he has denied firing any shots or being directly responsible for any deaths, claiming that had joined the gunmen only at the behest of his elder brother who was among the hostage-takers killed by security forces and that he did not know where they were going or what their plan was.
Chechen rebel warlord Shamil Basayev claimed responsibility for the Beslan school attack, which ended three days after it began in a horrific bloodbath marked by ferocious and chaotic fighting between security forces and the hostage-takers.
The battle ended in the deaths of 331 people, including 186 young children.
Of the alleged hostage-takers, 31 were killed and Kulayev was, according to Russian authorities, the only one to be captured alive.