Chelsea B.
Yelp
The Havelské Tržiště (literally in English Havel's Market) is a permanent outdoor market close to the Old Town Square (Staroměstské Náměstí) and the Můstek
metro stop. Beyond just being darned cute, I've found it to have some of the best prices and selection for touristy items near the Old Town--postcards (only Kč 5), magnets, mugs, and kitschy items abound, but you'll also find nicer options than in the made-in-China neon souvenir shops. My favorites are local artwork (both originals and prints), tea and food items, and metal and ceramic jewelry. I've brought home most of my gifts from here both times I've come to Prague.
Unlike in most of Prague, the prices posted are somewhat negotiable--but not terribly, usually sticking close to what is posted. However, you'll find a significant price variation from stall to stall, so it behooves you to look around before you make your final purchases. The painting we got (the exact print) ranged from Kč 450 to Kč 700 depending on the stall, and fruit and snacks had a variation of about Kč 10.