Madoff, 67, pleaded guilty in June to criminal charges including conspiracy to commit securities fraud for falsifying the books and records of the investment advisory company founded by his brother, Bernard Madoff.
He agreed at the time not to oppose a request by prosecutors for a maximum 10-year prison sentence and agreed to an order requiring him to forfeit a symbolic $143.1 billion. U.S. District Court Judge Laura Taylor Swain approved the sentence on Thursday.
"I am deeply ashamed of my conduct," Madoff said at the sentencing. "I accept full responsibility for my actions."
Of 13 individuals charged criminally in connection with the fraud, Peter Madoff is the only one, other than his brother, who was a member of the Madoff family. Bernard Madoff, 74, was sentenced in 2009 to a 150-year prison term and was ordered to forfeit $170.8 billion.
Customers lost about $20 billion, according to the trustee charged with recovering money for the victims.
Peter Madoff, a lawyer, had been chief compliance officer and a senior managing director at the firm, Bernard L. Madoff Investment Securities.
Prosecutors say Peter Madoff helped create false and misleading documents designed to make it appear that the firm had an effective compliance program. If the firm had such a program, prosecutors said it would have shown that no real trades were taking place.
Peter Madoff also transferred millions of dollars within the Madoff family to avoid tax payments to the Internal Revenue Service and also put his wife on the firm's payroll in a no-show job.
In court papers filed on Monday, John Wing, a lawyer for Peter Madoff, said his client only learned Bernard Madoff had participated in a Ponzi scheme days before it became public.
He argued his client had accepted responsibility and, as a result of the forfeiture, will be "penniless for the rest of his life."
"Peter's life has been shattered by his brother's Ponzi scheme as well as his own conduct and guilty plea, and he will almost certainly live out his remaining days as a jobless pariah, in or out of prison," Wing wrote.
Letters from dozens of friends, family members and business acquaintances in support of Peter Madoff were included in a 190-page filing to the judge. The letters and filing by his lawyers depict him as a younger sibling who looked up to his older brother.
Peter Madoff "idolized his brother more like a father figure" and "never really seemed to be able to stand up to his brother," Karen Binder-Brynes, Peter Madoff's psychologist of nine years, wrote.
Binder-Brynes said her client was "traumatized" by the revelation of the Ponzi scheme after the news became public.
The case is U.S. v. O'Hara et al, U.S. District Court, Southern District of New York, No. 10-cr-00228.