The punishment announced on Friday is the heaviest yet for international accounting firms operating in China.
PwC will be banned from signing off on any financial results in the country for six months.
Already, it has been losing clients.
China's finance ministry said it was imposing 116 million yuan in fines and confiscation of illegal gains on PwC, as well as a six-month business suspension, revocation of PwC's Guangzhou branch as well as an administrative warning.
A separate regulator, the China Securities Regulatory Commission, also imposed fines and confiscations totalling 325 million yuan on PwC for allegedly failing to perform due diligence in the audit of Evergrande.
The auditor came under Beijing's scrutiny after the January collapse of Evergrande, the world's most indebted developer and a symbol of China's ongoing property crisis.
China's securities regulator said in March that Evergrande had inflated its mainland China revenues by almost $US80 billion in 2019 and 2020.
In May, authorities fined the company $US577 million.
PwC had audited Evergrande's accounts for 14 years until 2023 and gave it a clean bill of health.
PwC has been the largest of the "big four" accounting firms operating in China, taking in nearly eight billion yuan in revenues in 2022, above competitors Deloitte, KPMG and EY, according to the Chinese Institute of Certified Public Accountants.
China has been cracking down on excessive borrowing by developers during a prolonged property market slump that has hit many other parts of the economy, including construction, building materials and home appliances.
