A Basel criminal court found the man guilty of multiple offences but ordered him confined to the treatment centre before , 20 Minuten reported on Wednesday.
The convicted man will be kept there for five years at which point his stay can be extended for a further five years, the newspaper said.
The court heard the man sexually assaulted his daughter in the family home on Wednesdays when his wife was away.
He filmed the activity and posted videos to the internet while asking his daughter to swear a vow of silence, according to earlier reports.
Police seized 142 films and more than 4,400 photos featuring his daughter.
“For your crime there almost no words,” Judge Susanne Nese said in delivering the sentence, 20 Minuten reported.
“You have taken away any innocence from your daughter.”
The man was handed a seven-year prison sentence but this will likely not be served if he remains in the psychiatric clinic.
Additionally, he was ordered to pay 70,000 francs in damages to his daughter, plus 15,000 francs to his wife.
He faces an extra 91,000 francs in court costs and penalties.