The apex court commuted the death sentence of 10 others to life imprisonment.
Dutt will have to serve 3 and a half years in jail, as he has already served 18 months.
An anti-terror TADA court had in 1993 awarded death sentence to 12 people, including Memon. One of them has passed away.
The actor was convicted in November 2006 for illegal possession of a 9mm pistol and an AK-56 rifle but was acquitted of more serious charges of criminal conspiracy under the now defunct anti-terror TADA.
After a marathon 10-month-long hearing starting November 1, 2011, the Supreme Court had in August 2012 reserved its verdict on appeals and cross-appeals in the 1993 Mumbai serial blasts case in which 257 people were killed and 713 were injured.
During the hearing, the bench had for the first time used laptops in the court to peruse the voluminous documents and records of the case and the submissions of various counsel.
1993 Mumbai blasts backgrounder
As many as 257 people were killed and 713 injured in the serial blasts that rocked 12 locations in Mumbai on March 12, 1993. Property worth Rs 30 crore was damaged in the terror strike.
The fishermen's colony at Mahim Causeway, Bombay Stock Exchange, Zaveri Bazar, Plaza Cinema in Dadar, Century Bazaar in Worli, Hotel Sea Rock, Sahar Airport, Air India building, Hotel Juhu Centaur and a petrol pump opposite the Sena Bhavan were some of the places that were targeted.
According to the CBI, fugitive don Dawood Ibrahim, along with Pakistant's ISI, engineered the blasts, and Tiger Memon and his brother Ayub were the main conspirators.
Sanjay is innocent
Bollywood actress and parliamentarian Jaya Prada on Thursday said she is heart broken at the news of Sanjay Dutt's jail term pronounced by the Supreme Court and called him an innocent person caught in the wrong way.
"He is innocent. It is very unfortunate. Knowingly or unknowingly it has been written in his fate that he has to struggle like this. His family contributed so much. He had a great father in Sunil Dutt who did so much for all," said Jaya Prada.
"I do not know the court decision. But Sanjay Dutt is very close to my heart. We worked together. Today is a sad day for me," said Jaya Prada.
Filmmaker Mahesh Bhatt, who had cast Sanjay in several of his films and stood by him in his bad times, said he was saddened and life was not like film sadly.
He said he also spoke to the actor the previous night and felt the turbulence in him.
Another Bollywood filmmaker Karan Johar said he was shattered to know of the verdict.
"I am truly shattered to hear of Sanju's sentence...the nicest guy I have known just does not deserve this...my heart goes out to him," Johar tweeted.
Reports said more than Rs 300 crore was riding on him.
The Supreme Court on Thursday sentenced for five years Bollywood actor Sanjay Dutt in the 1993 Mumbai serial blasts case, after his conviction in an arms case.
Dutt was earlier sentenced to six years of imprisonment by a TADA court in July 2007. Dutt, who is out on bail now after spending 18 months in prison, had challenged his conviction in the Supreme Court.
Dutt was accused of illegal possession of arms, including an AK-56 rifle. He was, however, acquitted of graver charges under TADA or the Terrorist and Disruptive Activities (Prevention) Act.
Effectively Sanjay Dutt will now have to spend three years and eight months in jail.
Dutt was given four weeks to surrender. Sanjay Dutt can file a review petition too.
Can't imagine 'Munna Bhai' without Sanjay Dutt: Subhash Kapoor
The third film in the "Munna Bhai" series is unimaginable without Sanjay Dutt, says director Subhash Kapoor, following the actor's conviction by the Supreme Court Thursday in the 1993 Mumbai blasts case.
"I can't imagine 'Munna Bhai' series without Sanjay Dutt. But unfortunately, things are not in our hands. I feel it a very harsh punishment. I am surprised as much as you all are surprised with this news," Kapoor told.
The first two films - "Munnabhai M.B.B.S" and "Lage Raho Munna Bhai" - were directed by Rajkumar Hirani, and there is still to be a definite word on who will direct the third film - Kapoor or Hirani.
However, now with Sanjay's conviction, progress on the film is yet to be decided upon.
"I will have to speak to the producer Vidhu Vinod Chopra about it. I can't take a call on that. In the next two days, we will have a chat and discuss what needs to be done."
"Our film has not yet gone on floors, but just imagine about other producers and directors, who have done films half-way with Sanjay," he added.
Budget not important, Sanjay Dutt is
T.P. Aggarwal, who is producing Sanjay Dutt's much-talked about film "Policegiri", is not bothered about the movie's budget or about the movie itself after the Supreme Court Thursday convicted the actor in the 1993 Mumbai blasts case. He says he is only thinking about Sanjay's well-being.
"Budget of 'Policegiri' doesn't matter to me. What matters to me the most is his safety. I share a good relationship with him and he is a wonderful human being. I don't care about the film, I only care for Sanjay Dutt," Aggarwal told.
The Supreme Court Thursday upheld the conviction of Sanjay Dutt under the Arms Act in the terror attack and sent him to five years in prison.
"This news is tragic. I will meet him (Sanjay) tomorrow (Friday) and will see what to do. We are only thinking positive, let us see what happens," he added.
Sanjay has already served 18 month in jail, and he will have to serve three years and six months. He has been given four weeks to surrender.
Aggarwal is upset with the news, and wants to give Sanjay time to get over it.
"Just imagine, I am shocked and so saddened by this news, so what would be his condition. I want him to be at peace. Let him take his own time and I will meet him tomorrow (Friday)," he said.
As for "Policegiri", in which Sanjay plays a cop, it is almost 95 percent ready.
"Just 12 to 15 days shoot is left. I am not keen to talk about the budget for the film, but it should be around Rs.25 crore. But as I said before, I am not bothered about the film, I am only worried about Sanjay Dutt."
Over Rs.100 crore riding on Bollywood's 'Khalnayak'
An estimated Rs.100 crore is riding on Bollywood actor Sanjay Dutt, who faces jail again after the Supreme Court Thursday upheld his conviction under the Arms Act in the 1993 Mumbai blasts case, industry insiders said.
The 53-year-old, who has films like the "Zanjeer" remake, "Policegiri", "Munna Bhai 3" and "P.K." under his belt, was charged with illegal possession of arms and sentenced to six years in jail in 2007. The Supreme Court has now been handed a reduced term of five years.
Sanjay, who has already served 18 months of his sentence, has been given four weeks to surrender.
"Sanjay's upcoming films 'Policegiri' and 'Zanjeer' might get affected as some portions are still left to shoot... 'P.K.' is scheduled for release next year. Besides 'P.K.' is more of Aamir Khan's film. I would say not more than Rs.100 crore is at stake," trade analyst Komal Nahata told.
Distributor Rajesh Thadani agreed. "Approximately Rs.100 crore to Rs.120 crore is at stake.
"The films, which are midway, will be affected. But it eventually depends on what the makers plan to do, and a lot also depends on how much time Sanjay goes in (the jail) for. Some amount of loss is bound to happen," he added.
Sanjay, the son of Bollywood legends Nargis and Sunil Dutt, has been entertaining moviegoers for over three decades. Last seen in "Zilla Ghaziabad" in February, he has already wrapped shooting for his part as Sher Khan in the remake of "Zanjeer", which has a budget of Rs.50 crore.
"We wrapped up shooting all his scenes just four days back," Amit Mehra, the film's producer, told, adding that "this news has came as a shock and is very heartbreaking".
"I can't imagine this as he is such a wonderful human being and an amazing person," he added.
Several members of the film fraternity, including Karan Johar, Mahesh Bhatt, Vishal Dadlani and Pritish Nandy, took to Twitter to share their views on the conviction of the actor, who made a mark for himself with movies like "Rocky", "Khal Nayak", "Sadak", "Saajan", "Mission Kashmir", "Munna Bhai" series and with the remake of "Agneepath".
Sanjay also has a part to play in Rajkumar Hirani's "P.K.", which is said to have been made in a budget of around Rs.50 crore. The actor's part, said to be a cameo, has been closely guarded.
On the endorsement front, Sanjay promotes a jewellery brand with wife Manyata. They have twins - a boy, Shahraan, and a girl, Iqra, born in 2010. Sanjay has an elder daughter named Trishala from his first wife Richa Sharma.
The actor was charged with being in possession of an AK-56 rifle and a 9 mm pistol. The 1993 serial blasts that ripped through India's financial capital killed 257 people and injured more than 700.