Malvo was initially arrested under federal charges, but they were dropped. He was transferred to Virginia custody and sent to jail in Fairfax County. He was charged by the Commonwealth of Virginia for two capital crimes: the murder of FBI analyst Linda Franklin "in the commission of an act of terrorism" (an addendum to Virginia law that was added after the September 11, 2001, attacks) and the murder of more than one person in a three-year period. He was also charged with the unlawful use of a firearm in the murder of Franklin. Initially, a Fairfax attorney, Michael Arif, was appointed to represent him, along with Thomas B. Walsh and Mark J. Petrovich. Later, prominent Richmond attorney Craig Cooley was appointed to the team and assumed a leadership role. While in jail, Malvo made a recorded confession to Detective Samuel Walker in which he stated that he "intended to kill them all".

Malvo and his mother, Una Sceon James, first met John Allen Muhammad in Antigua and Barbuda around 1999, where James and Muhammad developed a strong friendship. Later, James left Antigua for Fort Myers, Florida, using false documents. She left her son with Muhammad, reportedly planning to have him follow her later. Malvo arrived illegally in Miami in 2001, and in December of that year, he and his mother were apprehended by the Border Patrol in Bellingham, Washington. (Uma James was deported to Jamaica on December 15, 2002 in the aftermath of the shootings.) In January 2002, Malvo was released on a $1,500 bond. Malvo traveled to Bellingham, Washington, where he lived in a homeless shelter with Muhammad. Malvo enrolled in Bellingham High School with Muhammad falsely listed as his father, but he did not make any friends, according to his classmates. While in the Tacoma, Washington area, according to his statements to investigators, Malvo shoplifted a Bushmaster XM-15 from Bull's Eye Shooter Supply and practiced his marksmanship on the Bull's Eye firing range adjacent to the gun shop. Under federal laws, neither Muhammad nor Malvo was legally allowed to purchase or possess guns, with both Classified as prohibited persons under the Gun Control Act of 1968.

In 2003, Malvo and Muhammad were named in a major civil lawsuit by the Legal Action Project of the Brady Center to Prevent Gun Violence on behalf of two of their victims who were seriously wounded and the families of some of those murdered. Co-defendants Bull's Eye Shooter Supply and Bushmaster Firearms contributed to a landmark $2.5 million out-of-court settlement in late 2004.

On October 26, 2004, under a plea bargain to avoid a possible death penalty, Malvo entered an Alford plea to the charges of murdering Kenneth Bridges and attempting to murder Caroline Seawell while Malvo was in Spotsylvania County, Virginia. He also pleaded guilty to two firearms charges and agreed not to appeal his conviction for the murder of Franklin. He was sentenced to life in prison without parole for murder, plus eight years imprisonment for the weapons charges.

One Virginia prosecutor in Prince william County had stated he would wait to decide whether to try Malvo on additional capital charges in his jurisdiction until the U.S. Supreme Court ruled on whether juveniles may be subject to the penalty of execution. However, in light of the March 1, 2005 Supreme Court decision in Roper v. Simmons that the Eighth Amendment prohibits execution for crimes committed when under the age of 18, the prosecutors in Prince william County decided not to pursue the charges against Malvo. However, prosecutors in Maryland, Louisiana and Alabama were still interested in putting both Malvo and Muhammad on trial.

In Muhammad's May 2006 trial in Montgomery County, Maryland, Malvo took the stand and confessed to a more detailed version of the pair's plans. Malvo, after extensive counseling, admitted that he had been lying in the statement he made after his arrest when he admitted to being the triggerman for every shooting. Malvo claimed that he had said this in order to protect Muhammad from the death penalty because it was more difficult to achieve the death penalty for a minor. Malvo stated, "I'm not proud of myself. I'm just trying to make amends", expressing his regret in the shootings. In his two days of testimony, Malvo outlined detailed aspects of all the shootings.

As Malvo was 17 when he committed the crimes, he cannot face the death penalty, but still may be extradited to Alabama, Louisiana and other states for prosecution. At the outset of the Beltway sniper prosecutions, the primary reason for extraditing the two suspects from Maryland, where they were arrested, to Virginia was the differences in how the two states deal with the death penalty. While the death penalty was allowed in Maryland, it only applied to persons who were adults at the time of their crimes, whereas Virginia had also allowed the death penalty for offenders who had been juveniles when their crimes were committed. A death sentence was more likely to result in execution in Virginia than in Maryland, which abolished its death penalty in 2013. In May 2005, Virginia and Maryland reached an agreement to allow Maryland to begin prosecuting some of the pending charges there, and Malvo was extradited to Montgomery County, Maryland under heavy security.

As of 2014, Malvo is incarcerated at the Red Onion State Prison as Virginia Department of Corrections Inmate 1180834.