The military court sentenced Elor Azaria on Tuesday after he was convicted of manslaughter for killing Abdul Fatah al-Sharif in the occupied West Bank in March last year.
He also received 18 months in suspended sentences and was demoted from sergeant to private.
"The Israeli military court ruling exposes the level of Israeli disregard for Palestinian blood... and the extent of racism in the occupation's institutions," the 22-member bloc said in a statement.
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The shooting in the West Bank city of Hebron was caught on video by a rights group and spread widely online.
It showed Sharif, 21, lying wounded on the ground, shot along with another Palestinian after stabbing and wounding a soldier, according to the army.
Azaria then shoots him in the head without any apparent provocation.
The case, which came against the backdrop of a wave of Palestinian knife, gun and car-ramming attacks that erupted in October 2015, has stirred controversy.
Some on the Israeli right have defended the soldier, a French-Israeli national, but military officials said the trial was important to maintain the institution's reputation.