The independent elections watchdog said the party had made "numerous failures" in reporting its expenses for the 2015 General Election and three by-elections in 2014.
It is understood to be the biggest fine ever imposed by the commission.
Commission chairman Sir John Holmes said the Tories' failure to follow the rules "undermined voters' confidence in our democratic processes" and said there was a risk political parties were seeing such fines as "a cost of doing business".
The fine follows the news that a dozen police forces have sent files to the Crown Prosecution Service as part of a probe into the Conservatives' 2015 election expenses.
At least three Tory MPs have been quizzed by police investigating whether election finance laws were broken in the 2015 contest.
The parallel investigation by the Electoral Commission found that the Tories' 2015 spending return was missing payments worth at least Â£104,765.
Separately, payments worth up to Â£118,124 were either not reported to the Commission or were incorrectly reported by the party, a portion of which was recorded as national party spending when it should have been recorded as candidate spending in individual constituencies.
In addition, the Tories did not include invoices or receipts for 81 payments worth Â£52,924 and failed to maintain records explaining the amounts it invoiced to candidates in three 2014 by-elections for work on their campaigns, meaning the accuracy of the sums could not be verified.
Sir John said: "Our investigation uncovered numerous failures by a large, well-resourced and experienced party to ensure that accurate records of spending were maintained and that all of the party's spending was reported correctly.
"The rules established by Parliament for political parties and their finances are there to ensure transparency and accountability.
"Where the rules are not followed, it undermines voters' confidence in our democratic processes, which is why political parties need to take their responsibilities under the legislation seriously."
He went on: "This is the third investigation we have recently concluded where the largest political parties have failed to report up to six-figure sums following major elections, and have been fined as a result.
"There is a risk that some political parties might come to view the payment of these fines as a cost of doing business; the Commission therefore needs to be able to impose sanctions that are proportionate to the levels of spending now routinely handled by parties and campaigners."