The BBC reports that the 60-year-old prominent democracy activist and long-time opponent of Communist Party rule has been under house arrest since early February. His trial lasted one day.
Four co-defendants received prison terms ranging from 18 months suspended to six years.
Nguyen Phong was sentenced to six years in prison and three years under probation and Nguyen Binh Thanh, five years in prison and two years under probation, Vietnam News Agency says.
"The behaviour of the defendants amounts to the crime of spreading propaganda against the Socialist state", Judge Bui Quoc Hiep told the court in the central city of Hue.
Earlier, a policeman had removed Fr Ly from the court after he shouted "Down with the Communist Party".
In an unusual move, journalists were allowed limited access to the proceedings.
Fr Ly was last jailed in 2001 after he urged the US to link its trade policy with Vietnam's human rights record. He was released as part of an amnesty in 2005.
Fr Ly is a founding member of Bloc 8406, a pro-democracy movement launched last April. He is also a member of the Progression Party.
Leading members of both groups have been detained in recent months, our reporter adds, in what appears to have been a concerted drive against opponents of the communist government.
An envoy from the Vatican raised the case of Fr Ly with the authorities during a visit to Vietnam earlier this month, but the envoy would not say what Vietnam's response was.
State media has accused Fr Ly and other pro-democracy activists of trying to undermine the Communist Party by forming illegal parties to field candidates in National Assembly elections in May.
Only the Communist Party is allowed to stand, although a small number of seats are reserved for non-party members.
Vietnam priest jailed for dissent (BBC News, 31/3/07)
Anti-government propagandist receives 8-year prison term (Vietnam News Agency, 1/4/07)
LINKS (not necessarily endorsed by Church Resources)
Fr Nguyen Van Ly (Wikipedia)
Vietnamese democracy priests arrested (CathNews, 21/2/07)
Vietnam releases dissident priest (CathNews, 23/2/05)
Vietnamese freedom fighter priest arrested again (CathNews, 21/5/01)
2 Apr 2007