US Consumer Product Safety Commission said firm will pay a $2.3 million penalty to settle allegations.
The Wall Street Journal has reported that Mattel has been fined for knowingly importing and selling up to two million toys which violated a federal lead paint limit.
The fine represents the agency's highest toy-related penalty ever. The agency said as part of the settlement agreement, the companies deny the allegations.
The settlement stems from a string of Mattel and Fisher-Price product recalls in 2007 concerning up to 1.1 million noncompliant toys between July 2006 and August 2007.
The CPSC said that before those recalls, Mattel had imported up to 900,000 noncompliant toys between September 2006 and August 2007.
The firm said the settlement "resolves Mattel's outstanding issues with the agency related to certain matters that arose in 2007." The company continued to say that it "promptly took a series of steps after discovering compliance issues with some of our toys at that time" and "continues to be vigilant and rigorous in ensuring the quality and safety of our toys."