The Financial Reporting Council (FRC) fined and severely reprimanded the "big four" accountant after ruling it did not spot conflicts of interest in its advice to MG Rover and directors who bought the company before its failure.
West Midlands car maker MG Rover went into administration in 2005 with debts of £1.4 billion and more than 6000 job losses. It had been bought by directors known as the Phoenix Four for a token £10 five years earlier.
Former Deloitte partner Maghsoud Einollahi was also fined £250,000 and banned from the profession for three years after he and the firm showed a "persistent and deliberate disregard" of accountancy ethics.
FRC executive director for conduct, Paul George, said the fines aimed to deter misconduct and "bolster public and market confidence".
The tribunal in July found against Deloitte on all 13 allegations, including failing to properly consider the public interest. It said two flawed deals in 2001 and 2002 benefited the Phoenix Four rather than MG Rover, and earned Deloitte hefty fees.
A Deloitte spokeswoman said the firm took its public interest obligations seriously and was disappointed in the verdict. She added the tribunal did not criticise the quality of the firm's work, but still found against it, and warned this could have negative implications for the advice firms and members provided.