South Korea said that Nissan Motor had manipulated emissions on a diesel sport utility vehicle and that it planned to fine the automaker as well as sue the head of its Korean operations.
The government said the Japanese automaker had used a so-called defeat device that helps a vehicle's emissions management system turn off during regular driving conditions.
Nissan denied any wrongdoing.
"Nissan Motor has never illegally manipulated any vehicles we have produced so far and used defeat devices in those cars," the automaker's Korea unit said in a statement.
The South Korean environment ministry said it planned to fine Nissan 330 million won (US$279,920) for manipulating emissions on its Qashqai SUV. It will also order a recall of the 814 Qashqai vehicles sold in the country so far.
South Korea conducted tests on 20 diesel vehicles, after finding in November that Germany's Volkswagen AG had falsified emissions tests.