A Moscow court has refused to send prominent Russian opposition figure and anti-corruption campaigner Alexei Navalny to prison.

Navalny is serving a 3½-year suspended sentence handed down in late 2014 after he was convicted of defrauding a French cosmetics company, a case widely seen as political retribution.

The court on Monday denied an appeal by the federal penitentiary service for Navalny to serve the remainder of his sentence behind bars.

By not sending Navalny to prison, the Kremlin avoids making him a martyr and potentially provoking protests. The frequent appeals against the suspended sentence, however, serve to remind him and the opposition as a whole that they are vulnerable.

Navalny's younger brother, Oleg, was convicted in the same case and sent to prison to serve out his sentence.