Nigeria wants mobile phone companies to verify the identity of their customers.
The government says it is concerned unregistered Sim cards are being used by criminal gangs.
The South African company has been in talks with authorities since October when the original fine was imposed.
It said on Thursday it had succeeded in reducing the fine by a third.
The original fine amounted to double MTN's annual profits last year.
Since it was imposed by the Nigerian Communications Commission (NCC), MTN has made a number of senior managerial changes, which included the resignation of the chief executive of its Nigerian unit, Sifiso Dabengwa.
"After further engagements with the Nigerian authorities, the NCC has reduced the imposed fine," MTN said in a statement. It added the fine was now $3.4bn.
MTN has 231 million subscribers in 22 countries across Africa, Asia and the Middle East. However, Nigeria is its biggest market.
In September, the company was named as most admired brand in Africa in the Brand Africa 100 awards, beating Samsung, while it was also awarded the continent's most valuable brand, worth $4.6bn (Â£3bn).
MTN was South Africa's second mobile operator when it was set up in 1994 after the end of apartheid.
It began its expansion across Africa four years later with operations in Rwanda, Uganda and Swaziland.

Lorraine Kirkwood, 37, was last seen with a man as they got on to a bus in the East Dunbartonshire town.
Police had appealed for other passengers to contact them.

Dr Margaret Ann Rous, who was 37, and her 28-year-old husband David Rous were killed when a light aircraft struck the ground in Glen Etive.
The couple, from Newport-on-Tay in Fife, had been flying from Dundee to visit relatives on Tiree.
The emergency services had been alerted when contact was lost with the Piper Cherokee at about 13:50 on Saturday.
Police Scotland said the wreckage was discovered on the northern aspect of Glen Kinglass at 20:00, along with the remains of the two people on board.
Dr Rous' sister Johann Maclean paid tribute to her on social media.
She posted on Facebook: "Today has been the hardest day of my life, I love you Minnie xxxx"
She also thanked friends and family for their sympathy messages.
"Thank you all for the heartfelt messages, phone calls and visits," she wrote. "We appreciate your thoughts at this heartbreaking time xx."
Following the discovery of the wreckage, specialist officers remained at the scene in the Beinn nan Lus area of Glen Kinglass.
Inquiries are continuing into the cause of the accident.

Durant, 28, limped out of Tuesday's game after team-mate Zaza Pachulia fell on his left leg and caused a sprained medial ligament and leg bruising.
It is hoped he could return before the end of the regular season on 12 April.
The 2014 NBA Most Valuable Player joined the Warriors this season in a deal worth a reported $54.3m (£43.9m).
Durant had spent the previous eight seasons at Oklahoma City Thunder, where he was a four-time NBA scoring champion.
Western Conference leaders Warriors went into the game with a league-best 50-9 record and have already booked their place in the play-offs.
Africa's largest mobile operator, MTN, has succeeded in its bid to reduce a $5.2bn Â£3.4bn) fine imposed by Nigerian authorities for failing to cut off unregistered users.
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