The penalty follows a ceiling fire on the aircraft when it was parked at Anchorage Airport on January 18 last year, the Federal Aviation Administration (FAA) said in a statement.
"The fire was caused by chafed wiring that had resulted from improper installation of a hose clamp," it said, noting that the aircraft's manual includes "an explicit warning" about proper installation of the hose clamp.
"Maintenance work has to be performed precisely and correctly every time," added FAA Administrator Randy Babbitt.
The plane had conducted 2,107 flights in breach of regulations, according to the FAA, and Alaska most recently performed maintenance in the burned area in August 2008, said the statement.
The airline, which has 30 days to respond to the proposed fine, subsequently discovered the same problem existed on nine other B-737-400 aircraft in its fleet and took action, the FAA said.