Burhan Baraznjy, 37, had admitted to transferring EUR12,500 (US$17,630) to his homeland to finance the group, and Judge Christine Rebsam-Bender said most of that money did in fact reach Ansar al-Islam.
Baraznjy was arrested in June 2006 while traveling through Frankfurt's international airport.
Federal prosecutors had charged that Baraznjy was in contact with Ata Abdoulaziz Rashid, who is accused of playing a central role in Ansar al-Islam's European network. Rashid is one of three Iraqis currently on trial on charges of plotting to kill former Iraqi Prime Minister Ayad Allawi when he visited Berlin in 2004.
Ansar al-Islam, which was formed in the Kurdish parts of Iraq, is believed to include former al-Qaida members who fled the U.S.-led ouster of Afghanistan's Taliban rulers.
The organization and its successor, Ansar al-Sunna, are suspected of a string of deadly attacks on U.S. troops and Iraqi police as well as foreign embassies, international organizations and rival Iraqi groups.
Rashid and two co-defendants were arrested in pre-dawn raids on Dec. 3, 2004, hours before they allegedly planned to attack Allawi in Berlin.
Prosecutors have not said what kind of attack was planned at a business forum at a bank in downtown Berlin, which was canceled.
German authorities have had suspected supporters of the group under intense scrutiny since late 2003, when an Iraqi was arrested in Munich for allegedly channeling men and money to Ansar al-Islam.
In another trial that opened Wednesday in Celle, a 36-year-old Iraqi man accused of promoting al-Qaida faced charges of 28 counts of promoting terrorism in Iraq and recruiting new members for al-Qaida by distributing messages over the Internet.
Prosecutors charge that the man, whose identity was not revealed, posted statements by Osama bin Laden and other al-Qaida leaders in chat rooms and called on readers to join the jihad and become active for al-Qaida. The suspect is also accused of glorifying terror attacks in his own postings.
Austria does not intend to expel Russian diplomats because of the spy scandal