The US transport department is asking Toyota to pay a record fine of $16.4m (£10.7m) for failing to notify it about the flaws “in a timely way”.
The National Highways Traffic Safety Administration (NHTSA) said documents provided by Toyota showed the carmaker knew about the defect back in September 2009.
The US Transportation Secretary, Ray LaHood, said in a statement: “We now have proof that Toyota failed to live up to its legal obligations.”
He added: “Worse yet, they knowingly hid a dangerous defect for months from US officials and did not take action to protect millions of drivers and their families.”
US safety regulators are still examining whether Toyota has committed other violations.
Toyota has two weeks to appeal against this penalty.
A statement on Toyota’s website said: “We have already taken a number of important steps to improve our communications with regulators and customers on safety-related matters as part of our strengthened overall commitment to quality assurance.
“These include the appointment of a new Chief Quality Officer for North America and a greater role for the region in making safety-related decisions.”