Diddy was found guilty on two of five counts in his federal trial, which could land him in prison for the next 20 years, and he's not getting out on bail prior to sentencing ... but his team of lawyers are declaring victory.

The music mogul's co-lead attorney Marc Agnifilo said Diddy and the jury system won Wednesday because the jury in his criminal trial found him not guilty of racketeering and sex trafficking.

Agnifilo said RICO and sex trafficking trials are like fighting fire-breathing dragons ... and he says Diddy slayed this dragon. He was only found guilty of lesser charges related to prostitution.

Speaking on the steps outside the courthouse, Teny Geragos said it had been extremely difficult to prepare for trial while Diddy was incarcerated in MDC Brooklyn. She said she's been saying it for months ... Diddy did NOT sexually assault anyone. She said the media got it wrong every day for two years -- and she said the jury found her client did not sex traffic anyone.

Brian Steel thanked his defense team colleagues and thanked the press for writing truthfully.

Nicole Westmoreland said ... "Thankfully we have a right to a jury trial in this country." She commended Diddy for battling for his freedom, and said they're all proud of him. She urged the media to report vigorously on the acquittal.

Xavier Donaldson, Jason Driscoll, Alexandra Shapiro and Anna Estevao also spoke and thanked the judge, the jury, the press and the city.

As you know ... Diddy was found guilty on two counts of transportation to engage in prostitution and not guilty on racketeering and sex trafficking charges. A few hours after the verdict, Judge Arun Subramanian denied bail and said that Diddy displayed violent and dangerous behavior in the past -- like when he beat up Cassie at a Los Angeles hotel.

Diddy's family left the courthouse shortly after the verdict was read ... and, his mother, Janice, gave a thumbs-up to the assembled crowd.

Cassie's lawyer, Douglas Wigdor, also spoke to the press ... saying his client was happy Diddy was found guilty -- at least in part -- and faces significant jail time.

Later on, a Diddy supporter made a ruckus outside the courthouse -- cheering at the news and seemingly arguing with someone who didn't agree with the three not guilty verdicts.

After the verdict, Diddy's lawyers argued in court that he should be released from custody prior to sentencing ... though the government argued against it and won.

Diddy's trial began in early May, and we heard testimony from two of his ex-girlfriends, including Cassie and a woman only identified by her pseudonym "Jane."

Dawn Richard, Kid Cudi and several of Diddy's former assistants -- including "Mia," another woman testifying under a pseudonym -- testified against him during the trial ... and, Kanye West even made a brief appearance.

The verdict came down Wednesday morning while we were live streaming from inside the TMZ newsroom ... and, it shocked many. The gallery at the trial broke into applause after the verdict was read.