The judges said they believed the evidence of the woman whose testimony had led to two charges of rape.
Moshe Katsav resigned from the largely ceremonial post of head of state in 2007 and was indicted in March 2009.
While his resignation caused shock across Israel, it had limited political consequences.
Rape commands a jail term in Israel of at least four years, although Katsav is thought to be likely to contest the conviction in Israel's supreme court.State prosecutor Ronit Amiel said the verdict carried a message to other victims of abuse of power that they should not remain silent.
'Riddled with lies' The former president, 65, who was in office for seven years from 2000, had denied the charges, the most serious ever leveled against an Israeli head of state.
According to the indictment, the rape charges dated back to April 1998 when the former employee described as Woman A alleged he had first raped her at the tourism ministry office and later at a hotel in Jerusalem.
The further charges related to claims of sexual harassment of two women in 2003 and 2005 during his presidency.
Reading the verdict, Judge George Karra who presided over a panel with two other judges, said: "We believe the plaintiff [Woman A] because her testimony is supported by elements of evidence, and she told the truth."
Katsav's evidence, the judges decided, was "riddled with lies".
Although members of his family were with him in court, his wife Gila was not. He appeared to be visibly distraught as the verdict was read out and one of his sons was heard saying repeatedly "it's not true".
Sentencing is expected to take place next month and before the former president left court, he was told to surrender his passport.
His son, Boaz, told reporters the family would fight on to prove his innocence. "We will continue to walk with our heads high, so all the nation throughout its generations, with God's help, will know that father, the eighth president of the State of Israel, is innocent."
'Lynching' Moshe Katsav was born in Iran and immigrated at the age of six to Israel with his family in 1951. He joined the right-wing Likud party and held a number of ministerial posts before becoming president.
The allegations against him first surfaced in 2006 and led to him stepping down the following year, to be replaced by current President Shimon Peres.
After his indictment, he gave a televised news conference claiming he was the "victim of a lynching" organised by then-Attorney General Menahem Mazuz.
Prime Minister Benjamin Netanyahu said it was a "sad day for the State of Israel and its citizens" but added that the trial was a sign of strength of the country's judicial system.
"Today the court conveyed two clear-cut messages, that all are equal before the law and that every woman has exclusive rights to her body," he said.
Women's groups in Israel have welcomed the verdict, arguing that allegations of sexual harassment are too often ignored.
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