"This is a case of deliberate and massive fraud," U.S. District Judge Sean Cox said in approving the settlement that requires the automaker to make significant reforms. He also formally approved a $2.8 billion criminal fine as part of the sentence.
"This is a very serious and very troubling case involving an iconic automobile company," Cox added. "I just can't believe VW is in the situation it finds itself in today."
As well as accepting the agreement reached between VW and the U.S. government, Cox rejected separate calls from lawyers representing individual VW customers for restitution. No injured parties spoke in court, although they were invited to do so by the judge.
The September 2015 disclosure that VW intentionally cheated on emissions tests for at least six years led to the ouster of its chief executive, damaged the company's reputation around the world and resulted in massive fines and pay-outs.
The German automaker pleaded guilty in March to fraud, obstruction of justice and falsifying statements after admitting to installing secret software in 580,000 U.S. vehicles.
Speaking on behalf of Volkswagen, general counsel Manfred Doess said the company "deeply regrets the behavior that gave rise to this case. Plain and simple, it was wrong," he said.
The plea agreement calls for "organization probation," which allows for the company to be overseen by an independent monitor for three years.
At the sentencing hearing, a federal prosecutor confirmed that the government plans to name former Deputy U.S. Attorney General Larry Thompson to serve as the independent monitor.
An assistant U.S. attorney, John Neal, told the court Thompson has assembled a team of experts and said the U.S. government "has a great deal of confidence that (Thompson) will ensure compliance with all the terms" of the plea agreement.
In total, VW has agreed to spend up to $25 billion in the United States to address claims from owners, environmental regulators, states and dealers and to make buy-back offers.
The U.S. Justice Department has also charged seven current and former VW executives with crimes related to the scandal. One executive is in custody and awaiting trial and another pleaded guilty and agreed to cooperate. U.S. prosecutors said in January that five of the seven are believed to be in Germany. They have not been arraigned.
German prosecutors also are conducting a criminal probe of VW's excess diesel emissions.
Reporting by Nick Carey in Detroit and David Shepardson in Washington.