Giving his order, US district judge Harry D Leinenweber said "He commits crime, cooperates and then gets rewarded for the cooperation.
"That's what you deserve," the judge told Headley, 52, who had changed his given name of Daood Gilani to scout targets in Mumbai without arousing suspicion.
"No matter what I do it is not going to deter terrorists. Unfortunately. Terrorists do not care for it. I do not have any faith in Mr Headley when he says that he is a changed person now.
"I do believe that it is my duty to protect the public from Mr Headley and ensure that he does not get into any further terrorist activities. Recommending 35 years is not a right sentence.
In this courtroom sketch, Linda Ragsdale, a Tennessee children's author who was shot during the 2008 Mumbai attacks, reads an impact statement in the court. AP
"I will accept the government motion 35 years and sentence of 35 years and supervised release for life".
India on Friday said it is disappointed that David Headley did not get a "harsher" sentence than 35 years in jail awarded by a US court after he escaped death penalty for helping plot the 2008 Mumbai terror attack and vowed to push for his extradition.
External affairs minister Salman Khurshid said Headley would have got "harsher punishment" had he been tried in India while Union home secretary RK Singh said the Pakistani-American LeT terrorist and all those who were involved in the carnage should get death penalty.
Reacting to the sentencing of 52-year-old Headley by a Chicago court on Thursday, Khurshid said India is "disappointed" since the government wanted him to face trial in India where he would have been awarded "severest sentence."
However, he added, that India has full faith in the US legal system and that the sentence handed over to Headley was a "beginning".
"If the trial would have been held here, the punishment would have been tougher....the US legal system had no provision to extradite him, but we will still try and get him tried in India," Khurshid told reporters.
"The 35 year sentencing and what the judge said is a beginning. We understand there are legal procedures in the US but neverthless the position we have, the request(extradition) that we have made remains intact," he said.
Home secretary Singh said the government will keep seeking Headley's death sentence.
"We want death sentence for Headley and those who were involved in killing of 166 people in Mumbai. We will keep asking for his death sentence," he told reporters.
"Headley was involved not only in Mumbai conspiracy, but he also carried out recce in other places. Our request for his extradition stands. As far as sentence is concerned, all those involved in 26/11, should be given death," he added.
A week ago, Judge Leinenweber had sentenced 52-year-old Headley's school time friend, Tahawwur Rana, for 14 years of imprisonment followed by three years of supervised release for providing material support to LeT and planning terrorist attack against a Danish newspaper in Copenhagen.
Under a plea bargain, death sentence for Headley was already knocked down. But many were left surpised when the US prosecutors did not seek life sentence for Headley.
Headley was sentenced on 12 counts. Those included conspiracy to aid the Pakistani group Lashkar-e-Taiba, which mounted the attacks on the landmark Taj Mahal Hotel and other targets.
Both Headley and Rana were arrested in 2009. Headley was small-time narcotics dealer turned US's Drug Enforcement Agency (DEA) informer who went rogue.
In their closing argument, US attorneys Daniel J Collins and Sarah E Streicker had sought between 30 and 35 years of imprisonment for Headley.
His attorneys Robert David Seeder and John Thomas had sought a lighter sentence arguing the amount of information he provided to the US government against terrorist organisations like LeT and several of its leaders.
Headley has confessed that he had undertaken numerous scouting missions for his handlers in Pakistan.
He had videographed a number of targets in India including the iconic Taj Hotel in Mumbai which was attacked by 10 LeT terrorists.
According to security agencies, the detailed videos made by Headley was the foundation on which the Mumbai attacks was planned and carried out.
Headley had even changed his name from Daood Gilani in 2006 to easily move in and out of India without raising suspicision.
The US attorneys argued that while there is no question that Headley's criminal conduct was deplorable, his decision to cooperate, provided uniquely significant value to the US government's efforts to combat terrorism.
"We are seeking less than life time sentencing, because of the significant intelligence value information provided by Headley. Crime is deplorable, shocking and horrific.
"I am not going to find the words to describe the Mumbai terrorist attack– the job is to balance the how serious the crime was and the information he provided immediately after his arrest.
"We have to recognize the significant value of the information. We believe that 30-35 years of imprisonment would be justified and balance and thus be downgraded from life sentence," Collins said.
In addition to providing insight into the personnel, structure, methods, abilities and plans of LeT, Headley took active steps to further the investigation into other terrorists including his handler Sajid Mir.
Mir was a senior Lashkar leader who was one of the main architects of the Mumbai attacks and acted as one of the controllers providing directions to the ten attackers.
Sajid was Headley's handler. Abu Qahafa, a senior Lashkar member who provided combat and other training to the ten attackers, acted as one of the controllers.
Headley's cooperation assisted the government in filing criminal charges against at least seven other individuals, and his testimony helped to secure the conviction of one co-defendant, federal prosecutors said.
Federal prosecutors also pointed Headley cooperated with Indian investigating agencies for seven days and that he has agreed to provide co-operation in the future as well through various means including videoconferencing.
But his extradition has been ruled out.
"As the court knows, Headley's testimony helped secure a conviction against (Tahawwur) Rana. Further, Headley has agreed to provide truthful testimony in any proceeding in the United States if called upon by the United States Attorney's Office, as well as any foreign judicial proceeding held in the United States by way of deposition, videoconferencing or letters rogatory," Collins said.