Gallagher had been acquitted Tuesday of nearly all charges, including premeditated murder, in the death of a 12-year-old ISIS fighter in Iraq. But a jury of seven soldiers found him guilty of posing for a photo with the fighter.
A few hours after jurors returned to court Wednesday to deliberate over his sentence, they decided to reduce Gallagher's rank from E7 to E6 and sentenced him to four months' confinement.
He is not expected to spend time in custody. Gallagher had already served 201 days in custody and it would be applied as time served.
As a result of Gallagher's reduced rank and forfeiture, his pension will be reduced, though it's unclear at this time by how much.
The jury delivered a stiffer sentence to Gallagher than the prosecution had requested. Prosecutors had only asked for a reduction in rank.
Gallagher, who did not testify during his trial, told jurors Wednesday that he takes "full responsibility" for his action on the day he appeared in the photo.
"This has put a black eye on the two communities I love: The United States Marine Corps and the Navy," he said. "Most of all, it has put my family through hell the last two years."
Navy prosecutors said that Gallagher took the photo after fatally stabbing the detainee while he was being treated by US medics in 2017 in Mosul, Iraq.
Gallagher's lawyer, Tim Parlatore, has said his client is likely to go home Wednesday since he has already spent more than four months in pretrial custody. He called the verdict a "huge weight" off Gallagher's shoulders and a "victory for justice."
Gallagher's wife had said the verdict meant her family was "finally vindicated" after being "terrorized" by a government that her husband had fought for.
"He's fought every major enemy of the United States. He is a righteous and noble individual," Andrea Gallagher said outside court Tuesday.
"I think this whole thing is disgusting. I want responsibility to be claimed by Naval Special Warfare."
Earlier on Wednesday, President Donald Trump expressed sympathy for Gallagher after he was cleared of most of the charges.
"Congratulations to Navy Seal Eddie Gallagher, his wonderful wife Andrea, and his entire family. You have been through much together. Glad I could help!," Trump tweeted.
Trump had helped get Gallagher moved to "less restrictive confinement" in March and was reportedly mulling a pardon for the SEAL.