Waste Management, which has its headquarters in Houston, Texas, agreed the payout with the California Air Resources Board for breaching air quality regulations in 2004 and 2005.
The firm has also agreed to comply with the state's Periodic Smoke Inspection Program, and to send staff responsible for monitoring vehicle emissions to classes run by the California Council on Diesel Education and Technology.
All smoke inspection records for 2007 and the next four years will also have to be submitted to the Air Resources Board.
Board chairman Mary D. Nichols said: 'Trash pick-up is a critical service, but emissions spewed from uninspected trucks are not something Californians should pay for with their health.
'Our enforcement teams will continue to ensure clean air laws are taken seriously.'
The money will be paid to the California Air Pollution Control Fund, which supports pollution-related research projects and programmes.
The state's Periodic Smoke Inspection Program requires annual tests of all California-based fleets to ensure heavy-duty vehicles are properly maintained, tamper-free and do not cause excessive smoke emissions.
Waste Management operates the largest waste trucking fleet in North America, with 22,000 vehicles on the road.
It also operates the largest network of landfills in the industry and is the largest recycler of municipal solid waste in North America.
Last month the company announced a major environmental initiative, including plans to spend up to $500m per annum over a 10-year period to increase the fuel efficiency of its fleet by 15% and reduce fleet emissions by 15% by 2020.