Carwyn Jenkins' dog had half its nose missing and injuries to its jaw, Aberystwyth Justice Centre was told.
Jenkins, 23, from Llanfarian, Ceredigion, admitted interfering with a sett and causing suffering to his dog.
He was sentenced to carry out 240 hours unpaid work and pay Â£4,000 costs.
The court heard the terrier was found injured when a warrant was executed at Jenkins' home.
The injuries were believed to have been caused days earlier by fighting with wild animals, and inquiries found that local vets had not been contacted.
An image found on Jenkins' mobile phone showed a terrier next to a hole with a badger visible.
The picture also gave the location where it was taken on private land, and evidence of human interference and digging was found when officers examined the site, the court heard.
Speaking after Jenkins' conviction, RSPCA Insp Keith Hogben said: "The dog involved in this incident suffered terrible facial injuries.
"Luckily he has recovered and is now available for rehoming, but for other dogs used in this way, it sadly can be very different.
"I hope this case is a warning for people who insist on putting dogs on badgers for sport that we will catch up with them."
A farm worker has been convicted of causing unnecessary suffering to his dog and interfering with a badger sett after police found images on his mobile phone.