The court ruled that faulty brakes on the Volvo 850 TDI vehicle were the indirect cause of the crash, in which a French teacher ran over two young children on their way to school.
The driver, 57-year-old Catherine Kohtz, was handed a six-month suspended prison sentence and a 300-euro fine, as well as having her licence temporarily revoked, for failure to control her vehicle.
"I feel a bit numb, but the most important thing is that Volvo has been convicted," Kohtz said after the verdict.
"All our efforts during seven years of procedure have been crowned with success," added her lawyer Thierry Kahn.
"Everything we said during the trial has been acknowledged by the court, i.e that the Volvo's brakes were not working."
Prosecutors had called for a 150,000-euro "dissuasive" fine against the car maker, which was found guilty of involuntary homicide and causing involuntary injury.
Volvo Cars spokesman in Sweden, Olle Axelson, said the company was still looking at the details of the verdict.
"This is a tragic incident for everyone involved," Axelson, while insisting that faulty brakes were not to blame.
"There was no problem with the brakes," he said.
The accident occurred on June 17, 1999, in the eastern French town of Wasselonne, killing two children aged 9 and 10 and leaving a third seriously injured.