The deal will require Refaeli to serve nine months of community service while her mother, Zipi, will be sent to prison for 16 months. The two are also ordered to pay a $1.5 million fine on top of millions of back taxes owed to the state.
The prolonged case, built around the celebrity model's worldwide income and the family's attempts to downplay her ties to the country, has sullied some of Refeali's previous image as a beloved national icon.
Still, she remains a popular TV personality and pitch-woman whose image is ubiquitous on highway billboards throughout the country. Last year, she hosted the Eurovision Song Contest in Tel Aviv.
The heart of the case revolves around Refaeli's residence earlier this decade when she gallivanted around the world in high-profile modeling campaigns, graced the cover of the Sports Illustrated swimsuit edition and had a lengthy romantic relationship with Leonardo DiCaprio.
Israeli tax law determines residency primarily upon whether the person spent most of the calendar year in the country. Refaeli claimed that she hadn't and therefore did not have to declare her worldwide income in certain years.
But prosecutors rejected her claim and charged her with providing incorrect tax information. For instance, Refaeli's indictment said she earned some $7.2 million between the years 2009-2012 while claiming to reside overseas to avoid paying taxes on her income.
In previous appeals, an Israeli court ruled that Refaeli’s relationship with DiCaprio did not qualify as a “family unit,” and therefore she could not claim his American residence to avoid paying the full taxes she owed.
Refaeli's lawyers said the plea bargain proved she hadn't intentionally evaded tax payments.
“In the relevant time period, Bar was in her early 20s, was working as an international model and was not involved in financial matters. Today she is taking responsibility for mistakes that were made,” they said in a statement.
Refaeli's mother, who also acted as her agent, was charged with failure to report income, avoiding paying taxes and aiding someone else in evading tax payments. The indictment said she signed leases for her daughter under the names of other family members to blur Refaeli's actual residency status and refrained from declaring her own income as her daughter's agent.
The Associated Press contributed to this report.