A Tel Aviv Magistrate's Court ordered Igal Sarna to pay the couple some $32,500 in damages over what it said was his unproven account in a Facebook post last year.
Netanyahu testified at the trial that the alleged incident, which Sarna said he learned about from an acquaintance citing one of the prime minister's security guards, never took place.
"He crossed the line," Netanyahu said of Sarna, who writes for the mass circulation Yedioth Ahronoth, a newspaper often critical of the Israeli leader. "It's a gross lie, absurd."
Netanyahu and his wife have a stormy relationship with the Israeli media. In January, he described the media as "left-wing" and "Bolshevik" and said they were out to bring him down.
In 2016, a Jerusalem labour court ruled that Sara Netanyahu insulted and raged at household staff in the prime minister's official residence. She is currently under police investigation for using state funds for personal spending.
(Reporting by Jeffrey Heller; editing by Jason Neely)
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)