The Diocese of Oslo is accused of going through telephone directories and adding the names of immigrants to the list of members of the church between 2011 and 2014.
By exaggerating the number of Catholics, the Church was entitled to obtain government subsidies for religious minorities.
The diocese's chief administrative officer, Thuan cong Pham, has been charged with aggravated fraud.
"We've never done anything illegal or received too much money," the Catholic Church said in a statement to The Local Norway.
"We have always recognised that we have made mistakes and had an unfortunate practise in parts of our registration. This was cleaned up a long [time] ago."
As well as imposing the fine, the Norwegian state is seeking a reimbursement of 40.6 million Krone (£3.8 million) which was paid to the church in subsidies under the false figures.
The Church has said in its defence that a recent wave of immigration from Lithuania and Poland has increased membership figures.
Norway national statistics report that the Catholic Church in Norway has about 145,000 members.