A Croatian court on Friday sentenced former general Mirko Norac to seven years in jail over his role in the wartime massacre of Serb civilians and prisoners of war.
Another former general and co-defendant, Rahim Ademi, was acquitted of all charges.
The case was the first to be transferred to Croatia by the UN war crimes tribunal in The Hague, and was seen as a key test of the country's judiciary as it bids for membership of the European Union.
Norac, 40, and Ademi, 54, had both been charged with allowing troops under their control to massacre 23 civilians and five prisoners of war in a 1993 military operation during the Serbo-Croatian war.
"Although he (Norac) knew ... that during the action persons who were subordinated to him were setting on fire and destroying houses, destroying property and that civilians were being killed, he did not do anything," judge Marin Mrcela said.
As a commander Norac "should have reacted adequately but he failed to do so," he said. The defendant was found responsible for the death of three civilians and two prisoners of war, as well as looting and destruction of Serb houses.
Ademi, at the time the commander of a wider area in central Croatia, was acquitted after the court ruled that his authority was too "restricted and reduced" to hold him accountable.
Mrcela said Ademi had on two occasions called, albeit unsuccessfully, for the intervention of military police to prevent war crimes.
"The court has eventually reached a right ruling as it should be," Ademi told journalists afterwards. "I have lived with this agony since 1993. Now I can live normally".
During the trial, which opened in June last year, each defendant had sought to shift responsibility onto the other.
The operation against an area held by Serb rebels resulted in 300 buildings being destroyed, water wells contaminated, cattle killed and civilian property looted.
The International Criminal Tribunal for the former Yugoslavia (ICTY) is moving cases to national justice systems as it plans to complete its mission before 2010.
Some 100 witnesses were questioned during the trial which ended earlier this week.
Norac's attorney said he would appeal the verdict with the country's Supreme Court.
In 2003, Norac was sentenced by a Croatian court to 12 years in jail for war crimes against ethnic Serbs committed in another area.
The trial was closely monitored by European observers, which has conditioned Croatia's EU candidacy on its ability to deal with war crimes committed by its own nationals.
In the past, indictments against former military leaders whom many locals view as heroes of Croatia's war of independence from the former Yugoslavia, have sparked anger and protests in the country.
Another three former Croatian generals -- Ivan Cermak, Ante Gotovina and Mladen Markac -- are being tried for war crimes against ethnic Serbs before the ICTY.
Croatia's proclamation of independence in 1991 sparked the four-year war with rebel Serbs, that claimed some 20,000 lives.
The rebels, who were politically and militarily backed by the then Belgrade regime, occupied a third of the country and expelled almost all non-Serbs.