The case of Ahmed el-Gezawi caused an outcry in Egypt where his relatives and human rights groups claimed he was detained for allegedly insulting the kingdom's monarch.
Saudi authorities denied their claims and said he was found at Jiddah's airport with more than 20,000 anti-anxiety pills hidden inside his luggage.
Supporters and human rights groups claimed he confessed to the smuggling charges under duress.
The agency said the Saudi court on Tuesday also convicted another Egyptian, who traveled to the kingdom with el-Gezawi, to six years and 400 lashes.
Saudi prosecutors had requested the death penalty during an initial hearing. Saudi judicial sources said because el-Gezawi was not sentenced to death that he received a prison sentence and 300 lashes could be a good indication that his punishment could be further lessened in an appeal.
The case caused brief diplomatic tension between Saudi Arabia and Egypt after protesters called for the expulsion of the Saudi ambassador.
Saudi Arabia closed its embassy in Egypt for one week after hundreds of protesters outside the Saudi Embassy in Cairo and consulates in other cities demanded el-Gezawi's release.During the protests, demonstrators chanted against the Saudi royal family and some raised their shoes alongside a picture of Saudi King Abdullah, a sign of deep contempt in the Arab world.
The case also revived long-standing resentment over the treatment of Egyptians working in the oil-rich kingdom, which is a destination for more than a million Egyptians searching for better jobs.
El-Gezawi is a human rights lawyer who has filed lawsuits in 34 cases of Egyptians held in Saudi detention without a stated reason or legal recourse.A partner at el-Gezawi's law firm, Mohammed Nabil, said el-Gezawi's case was politically motivated.
"There's absolutely no justice in this case. We're not asking for an exception. If he's guilty, then he should be convicted, but he's not," Nabil told The Associated Press.
He said the case also raised the question of whether the Egyptian government does enough to protect its citizens working abroad.
"He was defending Egyptians' rights and the Egyptian government failed to defend his rights," Nabil said.
The Egyptian consulate in Jiddah said it was appealing the verdict.
In a statement, The Arab Network for Human Rights Information condemned the verdict, stating the reasons why they think the decree is unjust.
"His (el-Gezawi) name was inscribed in the travel watch lists and access because of his political positions of the Saudi regime, and he was carrying only two suitcases, which are not sufficient to carry all these pills," the statement said.
The fact that he was not allowed a lawyer or any kind of defense also raised the question about the validation of the decree.
Assistant Egyptian Foreign Minister for Consular Affairs received a request Monday from el-Gezawi's family requesting a pardon from the king.
Members of his family were not available for immediate comment.