The 43-year-old electrical engineer showed no emotion as the verdict was read in Maricopa County Superior Court here where he was tried for the death of his wife, Yarmila.
Prosecutors said they will seek the death penalty in a hearing scheduled for Aug. 20. Jurors also had the option of convicting Falater of second-degree murder.
From the day he was arrested, Falater never denied killing his wife, Yarmila, never denied stabbing her 44 times that January night in 1997, and never denied drowning her in the family pool, reports CBS News Correspondent Jerry Bowen.
At his trial, Falater said he was as devastated as anyone when he learned what heÂ'd done, because throughout it all, heÂ'd been sleepwalking.
"Personally, itÂ's something thatÂ's going to haunt me forever," Falater testified.
An emotional Falater told jurors that the two were soul mates since high school, had a loving marriage and had pledged to be together throughout eternity.
"There was no way I could do that, not intentionally," said Falater, breaking down in tears several times during his testimony. "I loved her. I donÂ't know what I would do without her."
Prosecutor Juan Martinez said the Falaters' marriage wasn't the happy union that Falater described. He noted during his closing arguments Wednesday that the couple had disputes over Scott Falater's desire to have more children and his wife's waning dedication to the Mormon faith.
Mrs. Falater was not wearing her wedding ring when her body was found, Martinez noted.
Defense attorney Michael Kimerer has dismissed the disputes over children and religion, saying they were minor, and that there was no good reason for Falater to kill his wife of 20 years.
Falater claimed he had been repairing the swimming pool pump during his sleepwalk, using a hunting knife as a screwdriver, when his wife startled him.
In his closing argument, Martinez said the murder was premeditated. Martinez pointed out that Falater was able to recognize and quiet his dog during the alleged sleepwalk.
"How come he canÂ't recognize his wife?" asked Martinez. "Because heÂ's making it up."
Prosecutors charged that Falater changed his bloody clothes and boots, and stashed them in a plastic container along with the murder weapon. They called the act a deliberate, cold-blooded murder.
Kimerer argued that every expert has said there is a connection between sleepwalking and homicide. He said Falater should be set free because he did not consciously know what he was doing at the time and his brain was "fast asleep."
Falater and other family members testified that he had a history of sleepwalking and defense experts testified that sleepwalkers could be violent.