The 70-year-old former movie star, who gained mass popularity in over 100 action films before coming to power in a landslide 1998 election, remained calm when the verdict was read out after a 15-minute hearing, and said the charges had been trumped up by his arch-rival, President Gloria Arroyo.
The ex-president said Arroyo had offered him a pardon and voluntary exile, but he chose to undergo trial to prove his innocence to the Philippine people.
"I took a gamble. I thought the rule of law will prevail over here. This is really a kangaroo court. This is a political decision," he told reporters after the three-judge panel found him guilty.
The Sandiganbayan court ordered the ex-president, accused of amassing around $70 million from bribes and profits from illegal gambling during his brief term in office, to forfeit his mansion, worth around $16 million.
Estrada's lawyer said the defense team would contest the ruling, and could take the case to the Supreme Court.
The former leader was arrested at the beginning of 2001 on charges of plunder, perjury, and false declaration of assets, after being impeached and ousted from his post in a military-backed revolt.
Months after his former deputy Gloria Arroyo took his job, mass protests broke out outside the presidential palace and four people were killed in the ensuing police crackdown.
Fearing similar turbulence following today's verdict, thousands of riot police and troops were deployed outside the courthouse and the presidential compound, but protests were relatively low-key. The former leader was escorted to his mansion near Manila, where he remains under house arrest.
After the court's verdict was announced, President Arroyo said the Philippines must move on from the affair.
"We have a country to run, an economy to grow and a peace to win. We hope that this sad episode in our history will not permanently distract us from these goals," she said.
If the life sentence is enforced, Estrada is expected to serve around 20 years in jail. However, if he accepts the court ruling, he could seek a pardon from the president. Estrada was acquitted of the perjury charge against him.
The former leader retains strong popularity among poor people in the Southeast Asian country, which sprawls over 7,000 islands in the west Pacific and is home to almost 90 million. The country's authorities still anticipate street protests against the former leader's conviction.
Estrada says that as well as President Arroyo, the Roman Catholic Church and the business elite colluded to have him sentenced.
