John Warne, who lived in Longniddry in East Lothian, stole the money in connection with a VAT repayment fraud and spent it on fast cars and holidays.
Ewan Aitken, a former council leader in the city, welcomed the outcome of the case.
Edinburgh's former statutory notice system, which involved the council appointing external contractors to repair domestic properties, has been dogged by allegations of cronyism and corruption.
Claims of impropriety led to professional services firm Deloitte investigating two council divisions: Property Conservation, which oversaw works to domestic properties; and Property Care, which focused on local authority buildings.
Auditors found work had been carried out on council officers' homes at below market rate, uncovered conflicts of interest, and established gifts had been given to staff by contractors. A police probe came to similar conclusions.
Fifteen people, including ex-council staff and associates of contractors, were charged last year, while over a dozen staff from Property Conservation were either suspended or sacked.
The same division has since been wound up.
As revealed by the Sunday Herald, police separately investigated VAT-related fraud in the repairs system.
Up until 1998, the council mistakenly charged VAT on the repair bills for homeowners.
A team was set up inside the local authority, which Warne was part of, to recoup the cash from HMRC and give it back to homeowners.
However, Warne, 55, diverted £122,925.39 for his own benefit.
He did so between July 2008 and May 2010.
Warne spent the money on classic cars, home improvements, mortgage payments on buy-to-let properties, and lengthy holidays for relatives.
His crime only came to light after he had taken early retirement from the council.
Warne has since made a full repayment, which included the sale of his family home.
After pleading guilty in November, on Friday the former team leader in the council finance section was jailed for a year.
Sheriff Crowe said of the custodial sentence: "I am taking into account your previous good record, that full repayment has been made and that your plea of guilty was tendered at a very early stage.
"Nevertheless, I am left with a situation where you as a public servant embezzled funds from the council for your own benefit and to make gifts to friends and family.
"I was urged to consider making a maximum 300-hour community payback order.
"However, a breach of trust of this magnitude can, in my view, only be met by a prison sentence."
The sheriff added: "Had the case proceeded to trial I would have imposed a sentence of 18 months' imprisonment.
"In light of the early plea of guilty which avoided the need for the Crown to prepare for a complex trial and cite many witnesses, I am prepared to restrict the sentence to 12 months imprisonment."
Former council leader Ewan Aitken said: "I am glad this individual has been called to account, but this sentence does not get to the bottom of all the problem in the housing repairs system.
"I believe there are people who have got away with serious offences, for which the people of Edinburgh have suffered."
The council declined to comment.