The Civil Aviation Administration of China (CAAC) will take "relevant measures to limit operations" for the carrier, it said in a statement on its website, without giving specific details.
Last month, a scheduled Air Koryo flight from Pyongyang to Beijing was forced to divert and land in the northeastern Chinese city of Shenyang "because the plane caught fire", the official Xinhua new agency said, quoting a passenger on board. There were no casualties.
Air Koryo must improve training for similar incidents, improve communications with air traffic controllers and upgrade aircraft maintenance, the Chinese regulator said.
Although Air Koryo is the sole airline in the bottom "one star" category in the global Skytrax rating system for commercial airlines, its public safety record only has one fatal accident in more than 30 years.
Its route network is extremely limited, with regular flights to just three destinations in China, and Vladivostok in Russia.
The Pyongyang-Beijing service uses a Russian Tupolev Tu-204 - a twin-engine medium-range jet airliner that carries about 140 passengers.