Yishai Schlissel was also convicted of six counts of attempted murder.
He managed to infiltrate the parade three weeks after completing a 10-year sentence for a similar attack in 2005.
The court said the fact that the police had known about Schlissel and not stopped him was unconscionable.
Shortly after his release, he had lashed out at homosexuality in interviews and said the march needed to be stopped.
In anti-gay pamphlets, he asked Jews to "risk beatings or imprisonment" to act against the event.
He stabbed six people during the march in Jerusalem's city centre before being arrested. Shira Banki later died in hospital.
'We marched through blood'
Israeli media said Schlissel was initially turned away by police but managed to return to the parade by using side streets.
A police investigation last year called for the removal of six senior Israeli officers over the attack.
The Gay Pride event has long been a source of tension between Jerusalem's secular community and its Jewish Orthodox groups.
An Israeli court has convicted an ultra-orthodox Jew of murder over the stabbing to death of a 16-year-old girl at Jerusalem's Gay Pride parade last year.