Stuart Smith, 39, allowed patrons to openly smoke at the College Arms in Huddersfield on January 16, despite the national ban.
He was yesterday found guilty by jury at Huddersfield Magistrates Court.
Smith, of Newlands Farm, Newlands, in Halifax was handed a conditional discharge and told to pay Kirklees Council £2,500 in costs. He was also found guilty of failing to erect 'no smoking' signage at the pub.
Steve Noble, assistant director responsible for enforcing the Government's smoking ban, today reinforced the council's position.
He said: "One of the saddest and worrying elements of this case was that the illegal actions of this individual, which he sought to have well publicised in advance of carrying them out, reflected on the licensed trade as a whole.
"The fact that this was the first formal action we have taken since the law was introduced in July last year demonstrates that licensees and managers across the region recognise their responsibility to comply with the law."