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Judges sentenced Suu Kyi to three years of hard labour and imprisonment, but military ruler Than Shwe signed a special order commuting the sentence and ordering her to serve out a year-and-a-half under house arrest.
Obama branded the sentence "unjust" and said the junta would never be able to stamp out the people of Myanmar's desire for freedom.
"Today's unjust decision reminds us of the thousands of other political prisoners in Burma who, like Aung San Suu Kyi, have been denied their liberty because of their pursuit of a government that respects the will, rights, and aspirations of all Burmese citizens.
"They, too, should be freed. Suppressing ideas never succeeds in making them go away," he said.
Other world leaders rounded on the regime after the verdict, with the European Union threatening fresh sanctions and the United Nations Security Council calling a special meeting to discuss the decision.
Top US diplomat Hillary Clinton condemned the trial and demanded the release of US national John Yettaw.
"Thank you for the verdict," a grim-faced Suu Kyi, wearing pink and light grey traditional Burmese dress, said after the court at Yangon's notorious Insein Prison announced the judgement.
Yettaw, 54, the epileptic former US military veteran who swam to her home, was sentenced to seven years of hard labour and imprisonment on three charges.
Two female aides who lived with Suu Kyi also had their sentences reduced to 18 months. The opposition leader and her assistants had both faced jail terms of up to five years.
The 64-year-old Suu Kyi was later driven back to the house under tight security and the road outside the crumbling villa was sealed off, Myanmar officials said.
She has already been in detention for 14 of the past 20 years since Myanmar's ruling generals refused to recognise her National League for Democracy's landslide victory in elections in 1990.
The last, six-year period of her house arrest expired just after the trial started in May.
Home Affairs Minister Maung Oo had made a surprise entrance to the courtroom, just minutes after the judgment was read out, to announce Than Shwe's intervention in the case.
He said her time in house arrest could be shortened "if she lives well in the suspended sentence", saying that the move was "also for the peaceful security of the country and also to move towards democratisation."
The case has drawn international outrage amid claims that the junta was concocting the charges to keep her locked up for the elections due in 2010, Myanmar's first since the cancelled vote of 1990.
Suu Kyi's lawyers argued during the trial that she could not be held responsible for Yettaw's actions. Her lawyer Nyan Win said her legal team would decide whether to lodge an appeal.
Yettaw, a Mormon whose teenage son died two years ago in a motorbike crash, had testified that he swam to her house after receiving a "message from God" that he must protect Suu Kyi against a terrorist plot to assassinate her.
UN chief Ban Ki-moon's office said he was "deeply disappointed" by the sentence and demanded Suu Kyi's unconditional release.
The EU vowed to take "targeted measures" by reinforcing sanctions against the regime, while British Prime Minister Gordon Brown condemned the "sham trial" and French President Nicolas Sarkozy called for new sanctions.
Malaysia Tuesday led calls for an urgent meeting of the Association of Southeast Asian Nations (ASEAN) and fellow members Indonesia and the Philippines firmly condemned the verdict.
Protesters rallied against the verdict in cities including Tokyo, Bangkok and London.
Amnesty International's Myanmar analyst Benjamin Zawacki told AFP: "This is an attempt by the government to try to present a certain amount of leniency. But it's just enough to keep her away on election day."
However, Myanmar's state-run newspapers carried a commentary Tuesday telling foreign countries not to meddle in the nation's affairs and warning Suu Kyi's supporters not to cause "riots or protests" that would "harm democracy."
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Obama branded the sentence "unjust" and said the junta would never be able to stamp out the people of Myanmar's desire for freedom.
"Today's unjust decision reminds us of the thousands of other political prisoners in Burma who, like Aung San Suu Kyi, have been denied their liberty because of their pursuit of a government that respects the will, rights, and aspirations of all Burmese citizens.
"They, too, should be freed. Suppressing ideas never succeeds in making them go away," he said.
Other world leaders rounded on the regime after the verdict, with the European Union threatening fresh sanctions and the United Nations Security Council calling a special meeting to discuss the decision.
Top US diplomat Hillary Clinton condemned the trial and demanded the release of US national John Yettaw.
"Thank you for the verdict," a grim-faced Suu Kyi, wearing pink and light grey traditional Burmese dress, said after the court at Yangon's notorious Insein Prison announced the judgement.
Yettaw, 54, the epileptic former US military veteran who swam to her home, was sentenced to seven years of hard labour and imprisonment on three charges.
Two female aides who lived with Suu Kyi also had their sentences reduced to 18 months. The opposition leader and her assistants had both faced jail terms of up to five years.
The 64-year-old Suu Kyi was later driven back to the house under tight security and the road outside the crumbling villa was sealed off, Myanmar officials said.
She has already been in detention for 14 of the past 20 years since Myanmar's ruling generals refused to recognise her National League for Democracy's landslide victory in elections in 1990.
The last, six-year period of her house arrest expired just after the trial started in May.
Home Affairs Minister Maung Oo had made a surprise entrance to the courtroom, just minutes after the judgment was read out, to announce Than Shwe's intervention in the case.
He said her time in house arrest could be shortened "if she lives well in the suspended sentence", saying that the move was "also for the peaceful security of the country and also to move towards democratisation."
The case has drawn international outrage amid claims that the junta was concocting the charges to keep her locked up for the elections due in 2010, Myanmar's first since the cancelled vote of 1990.
Suu Kyi's lawyers argued during the trial that she could not be held responsible for Yettaw's actions. Her lawyer Nyan Win said her legal team would decide whether to lodge an appeal.
Yettaw, a Mormon whose teenage son died two years ago in a motorbike crash, had testified that he swam to her house after receiving a "message from God" that he must protect Suu Kyi against a terrorist plot to assassinate her.
UN chief Ban Ki-moon's office said he was "deeply disappointed" by the sentence and demanded Suu Kyi's unconditional release.
The EU vowed to take "targeted measures" by reinforcing sanctions against the regime, while British Prime Minister Gordon Brown condemned the "sham trial" and French President Nicolas Sarkozy called for new sanctions.
Malaysia Tuesday led calls for an urgent meeting of the Association of Southeast Asian Nations (ASEAN) and fellow members Indonesia and the Philippines firmly condemned the verdict.
Protesters rallied against the verdict in cities including Tokyo, Bangkok and London.
Amnesty International's Myanmar analyst Benjamin Zawacki told AFP: "This is an attempt by the government to try to present a certain amount of leniency. But it's just enough to keep her away on election day."
However, Myanmar's state-run newspapers carried a commentary Tuesday telling foreign countries not to meddle in the nation's affairs and warning Suu Kyi's supporters not to cause "riots or protests" that would "harm democracy."
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