The judge ruled that Megumi Igarashi's brightly-coloured kayak sculpture did not immediately suggest female anatomy.
However, she was fined 400,000 yen ($3,700) after a judge ruled that she broke the law by sharing data from 3D scans of her genitalia, which could be used to recreate the shape of a vagina.
Japan's strict obscenity laws prohibit public displays of genitalia.
Igarashi, 42, who goes by the alias Rokudenashiko, or "good-for-nothing girl", was arrested in 2014 after the kayak sculpture was displayed at a sex shop in Tokyo.
She was charged under obscenity laws for displaying the sculpture and for distributing the data behind it to those who donated money towards its creation.
On Monday, a judge decided that the bright colours and decorations applied to the kayak sufficiently disguised the origin of its shape.
But the data, despite having no discernible shape, could be used to faithfully recreate Ms Igarashi's genitalia using a 3D printer, and so was obscene, the judge said.
Ms Igarashi's fine was only about half the 800,000 yen penalty sought by the prosecution.
Ms Igarashi was first arrested in 2014 but released after several days following a legal appeal and a petition signed by more than 17,000 people.
But police arrested her again shortly afterwards, along with the owner of the sex shop that displayed the offending sculpture.
The case has sparked debate on the nature of censorship and Japan's obscenity laws.
Japan has a large and lucrative porn industry but bans the depiction of genitalia, leading adult film distributers to pixellate the offending anatomical areas in their productions.
On her website, Ms Igarashi, who has made several items based on her genitals using a silicone mould, said she wanted to make vaginas "more casual and pop", much like how penises are regarded as "part of pop culture" in Japan.
A Japanese court has found an artist not guilty for displaying a kayak based on the shape of her vagina.