The Diocese of Oslo — which manages the records of the Catholic Church of Norway — is believed to have deliberately added thousands of people to its list of members, boosting funds provided by the state in the predominantly Protestant country.
The city's bishop and the financial officer of the Diocese are suspects in the case and have been questioned by investigators, Oslo police's lawyer Kristin Rusdal told AFP.
The fake members — allegedly immigrant names taken out of the phone directory — would have added 65,000 people to the church's scrolls and awarded it an additional 50 million kroner ($6.57 million, 5.84 million euros)
from 2010 to 2014, according to Rusdal.
During that time, the country's Roman Catholic minority more than doubled in reported size, from fewer than 67,000 members in 2010 to 140,00 early last year, according to official figures.
"We never intended to do anything illegal," the Bishop of Oslo, Bernt Eidsvig, told the Dagbladet newspaper on Tuesday. "Our challenge was to record the Catholics who come to live in Norway… it is a huge task that was accomplished partly in a wrong way," he added.
The police began its investigation after receiving a complaint last week filed by an employee of the church.
In Norway, "aggravated fraud" is punishable by a fine for an organisation, and a prison sentence of up to six years for an individual.