The Commerce Commission said the "Roo Crew Take-Apart Vehicle Toys" were potentially dangerous because they contained multiple small parts and had failed several safety tests.
It said the District Court had imposed a fine of $234,000.
Commission head of Fair Trading and Product Safety Investigations Simon Pope said: "While the toys did carry some warnings, they were labelled and marketed for use by children aged 36 months or under.
"Multiple parts came off each variation of the toy, and they failed small parts testing."
This meant they did not comply with the product safety standard under the Fair Trading Act.
The Warehouse previously issued a voluntary recall notice for the toy.
The Commission said it encouraged anyone who still had one of the products to return them for a full refund.
The Warehouse disputes the Commission's portrayal of the safety risk, saying it related more to the packaging than the toy. RNZ is seeking further clarification from the Commission.
It said no child was injured and it removed the toy from sale immediately.
