Rajaratnam, 54, founder of the Galleon Group hedge fund that reached $7bn (£4.5bn) at its peak, was found guilty of running a network of informants that fed him secret information about some of the biggest listed US companies.
"The government is absolutely correct that insider trading is an assault on the free markets in a democratic society," US District Judge Richard Holwell said.
Rajaratnam was convicted of 14 securities fraud and conspiracy charges in May after a two-month trial.
His sentence was lighter than the 19-and-a-half-year minimum prison term that prosecutors had sought, but is still above the ten years handed down recently in another major insider trading case.
Holwell said he had taken into consideration the fact that Rajaratnam suffers from "advanced diabetes," which could lead to kidney failure, in his sentencing decision.
Holwell also fined Rajaratnam $10m, ordered him to forfeit another $53.8m, and refused to grant his request to stay under house arrest while he appeals.
He will serve his sentence in the Butner prison in North Carolina, where Ponzi scheme architect Bernie Madoff is held.
The Galleon case has been a major victory for the U.S. Attorney's Office in Manhattan.
Out of 26 people, including traders, lawyers, executives and consultants charged in the case, 25 have pleaded guilty or were convicted at trial of supplying or trading on illicit stock tips. One is at large.
But the case sent shock waves through Wall Street and the hedge fund industry.
Prosecutors called Rajaratnam the "modern face" of insider trading, putting him in a dubious pantheon of Wall Street power players such as takeover specialist Ivan Boesky and junk bond financier Michael Milken, principal figures in a mid-1980s insider-trading case. Both men served about two years in prison.