U.S. District Judge Richard Berman imposed a sentence of 32 months in prison on the Turkish banker convicted of helping Iran evade U.S. sanctions.
The sentence comes as a disappointment to prosecutors, who recommended Atilla serve at least 20-years for jeopardizing US national security.
Zarrab, 34, initially pleaded not guilty then chose to make a deal, becoming a USA government witness after admitting being involved in the multi-billion-dollar gold-for-oil scheme to subvert United States economic sanctions against Iran.
One of Atilla's lawyers, Victor Rocco, called the 32-month sentence "fair", but said the banker would appeal his conviction.
However, prosecutors on Wednesday noted that the government did not seek a 105-year sentence, or a life sentence for Atilla, adding that it recommended a sentence of about 20 years, some 80 years below guidelines.
At one point, an emotional defendant wiped his face with tissues as the judge read excerpts from 101 letters written by friends, family and work associates of Atilla describing the 47-year-old husband and father as a compassionate and religious man who frequently helped others.
"What we need to show the world in proceedings such as this, especially today, especially now, is that we Americans aren't bullies", he said.
A New York-based federal court announced the decision against Mehmet Hakan Atilla on Wednesday, just months after he was convicted of bank fraud and conspiracy in January. His conviction followed a four-week trial in which Atilla testified in his own defence.
US prosecutors accused Atilla, 47, of working with a Turkish-Iranian gold trader from 2010 to 2015 to help Iran evade sanctions by disguising the oil sales as fraudulent gold trades and food-aid transactions.
"A great injustice is being done against Halkbank", Erdogan told Bloomberg TV in an interview on Monday, calling Atilla "definitely innocent".
"Mehmet Hakan Atilla helped execute an audacious scheme to circumvent our nation's Iran sanctions regime by engaging in billions of dollars' worth of deceptive transactions", Berman said.